By Ameer Yaqub

The ICB Islamic Bank, which emerged from the collapse of Oriental Bank in 2008, is currently grappling with a severe liquidity crisis that has left it unable to repay depositors. This situation underscores the vulnerabilities within the bank and the broader challenges facing the Islamic banking sector in Bangladesh.

The crisis has had a direct impact on depositors. Abdul Hamid Mahbub, with a deposit of Tk 1,00,000 at the bank’s Moulvibazar branch, recently faced the stark reality of the bank’s financial troubles. “On Tuesday, I went to the bank with a cheque for Tk 55,000, but the branch manager said they had no money at the time,” Mahbub told The Daily Star. Similar stories are being reported across other branches, including in Dhaka’s Paltan and Karwan Bazar areas.

In a bid to mitigate the crisis, ICB Islamic Bank sought Tk 50 crore in collateral-free liquidity support from Bangladesh Bank (BB) on January 31. However, this plea was denied two weeks later due to the bank’s existing liabilities, which total Tk 425 crore. BB’s Off-site Supervision Department has since requested the Banking Regulation and Policy Department to take corrective measures, as the bank’s operations are severely hampered by the liquidity crunch.

The liquidity crisis is compounded by a range of systemic issues. ICB Islamic Bank is dealing with frozen deposits, a significant capital shortfall, and high levels of defaulted loans. As of the end of 2023, the bank faced a capital shortfall of Tk 1,823 crore, with 87% of its total loans amounting to Tk 790.4 crore classified as bad.

The crisis has also affected the bank’s ability to pay its employees. Currently, ICB Islamic Bank employs 350 people across 33 branches, and delays in salary payments have become routine. According to Muhammad Shafiq Bin Abdullah, the bank’s managing director, the influx of depositors seeking withdrawals has exacerbated the situation. “This year, we repaid our depositors Tk 50 crore,” Shafiq noted, emphasizing the unprecedented nature of the current crisis.

Legal complexities surrounding the bank’s ownership have further muddied the waters. Issues stemming from its previous owner, Orion Group, have left ambiguities regarding current ownership, and a related case is still pending in court. This uncertainty has hindered efforts to stabilize the bank and secure necessary funds.

ICB Islamic Bank’s roots trace back to 1987 when it operated as Al-Baraka Bank. It was rebranded as Oriental Bank in 2004 and later dissolved by the central bank in 2006 due to significant irregularities. The restructured bank renamed ICB Islamic Bank in 2008, saw Swiss ICB Group and Malaysian investors take majority ownership. Despite these changes, the bank has struggled to achieve financial stability.

Efforts are ongoing to address the liquidity crisis. Md Mezbaul Haque, executive director and spokesperson of Bangladesh Bank, highlighted that a large portion of ICB Islamic Bank’s funds are tied up with leasing companies, contributing to the liquidity shortfall. “We asked the Malaysian shareholder of the bank to inject fresh funds,” he stated, expressing hope that the crisis could be resolved soon.

ICB Islamic Bank’s struggle to navigate this crisis is a crucial test for the resilience of the Islamic banking sector in Bangladesh. While the bank’s management remains hopeful, the path to recovery will require strategic interventions, regulatory support, and renewed confidence from depositors and stakeholders.

HAQQ Network Expanding Islamic Web3 Initiative With Gold Token and RWA” has taken a significant leap forward with the launch of its Gold Token in June, marking a critical advancement in the network’s broader ambition of tokenizing real-world assets (RWA). In a detailed blog post, Alex Malkov, the co-founder and CEO of HAQQ Network, highlighted the dual role of the Gold Token—not only as a stable store of value but as a pivotal element in the Islamic Interbank Market.

Tokenized commodities like the Gold Token promise a more streamlined and transparent approach than traditional asset exchanges. The Gold Token is not just a digital asset but is directly exchangeable for physical gold. HAQQ plans to expand this concept to include other investment commodities and potential securities.

Furthering its innovative strides, HAQQ Network also intends to tokenize Islamic financial products such as Sukuk, transforming them into blockchain-based tokens. This transformation enhances liquidity, accessibility, and efficiency, allowing for fractional ownership and broader distribution. Importantly, these tokens adhere to Shariah law, integrating compliance rules within the token’s smart contracts to ensure religious adherence.

Expanding its offerings, HAQQ has recently introduced VISA cards denominated in its ISLM token, explicitly targeted at EU residents. This development represents a significant stride toward bridging Islamic digital assets with mainstream financial services, offering EU users a platform to manage their finances according to Islamic principles.

Last year, the Islamic Coin project under HAQQ Network saw an impressive launch, garnering extensive coverage from leading crypto publications globally and major fintech outlets in the Middle East. The project built a robust community of over 1.5 million members and was backed by an advisory board that includes members from the UAE’s ruling families. The ISLM token raised substantial funds through private sales and secured investments, totalling over $400 million.

However, despite its successful launch and substantial technological foundation, Islamic Coin faced hurdles, including regulatory scrutiny and media misinformation. The Virtual Asset Regulatory Authority (VARA) initiated an investigation, but HAQQ Network cooperated fully, leading to the closure of the investigation without any enforcement actions.

Alex Malkov acknowledged the challenges posed by the VARA investigation but reiterated their commitment to transparency and combating misinformation and Islamophobia. This stance aims to foster a more inclusive and equitable financial ecosystem. Despite setbacks, Islamic Coin is now listed on major centralized exchanges such as KuCoin, LBank, XT, and MEXC and decentralized platforms like SushiSwap, Osmosis, and Uniswap. This has significantly boosted the token’s liquidity and visibility.

Moreover, HAQQ has launched a non-custodial wallet available on the Apple Store and Google Play, designed to attract non-crypto users with features like social login and device recovery. This wallet is trendy in regions such as Nigeria, Indonesia, and Turkey, providing secure asset management without intermediaries.

A noteworthy wallet feature of the “HAQQ Network Expanding Islamic Web3 Initiative With Gold Token and RWA” is staking, where ISLM holders can earn rewards while enhancing the network’s security and governance. Additionally, they can participate in ‘halal yield’ through liquidity pools on decentralized exchanges, adhering to Islamic financial principles and enabling Muslim investors to engage in the digital economy without compromising their religious values.

HAQQ Network’s dedication to merging Islamic finance with cutting-edge Web3 technology demonstrates its potential to influence the financial landscape significantly, adhering strictly to Islamic ethical standards

By Hafiz M. Ahmed

In recent years, the concept of microtakaful has emerged as a significant development in Islamic finance, offering a Shariah-compliant insurance solution tailored to the needs of the less affluent segments of society. This form of microinsurance is designed not only to adhere to Islamic principles but also to provide financial protection to those typically underserved by conventional insurance systems. This blog post will explore what microtakaful is, how it operates, and its impact on communities.

What is Microtakaful?

Microtakaful is a form of Islamic microinsurance that offers Shariah-compliant insurance solutions to low-income individuals and communities. This system operates on the principles of mutual assistance and risk sharing, where participants contribute small premiums to a collective pool. The funds are managed according to Islamic law, ensuring no investment in prohibited activities, and profits and risks are shared among all participants.

Difference between Takaful and Microtakaful

Takaful and microtakaful are both forms of Islamic insurance, but they cater to different segments of the market and have distinct operational scales and objectives. Here are the key differences between the two:

1. Target Audience:
   • Takaful is geared towards a broader audience, including businesses, middle to high-income individuals, and larger entities seeking Shariah-compliant insurance solutions.
   • Microtakaful specifically targets low-income individuals and communities, offering them affordable insurance coverage to help mitigate financial risks associated with accidents, health issues, and other unforeseen events.
2. Scale and Scope of Coverage:
   • Takaful policies generally cover a wide range of risks and can offer substantial coverage amounts, similar in scope and scale to conventional insurance policies.
   • Microtakaful provides smaller, more limited coverage aimed at essential needs, reflecting the lower premium capacity of its clientele. The focus is on accessibility and essential protection rather than comprehensive coverage.
3. Premiums and Contributions:
   • Takaful involves higher premiums reflecting the broader and more significant coverage it offers, and these premiums are also used to invest in permissible (halal) ventures according to Islamic law.
   • Microtakaful requires very small, affordable premiums to ensure that the financially weaker sections of society can also access insurance. These contributions are pooled to cover the collective risk of the group.
4. Objective and Impact:
   • Takaful aims to provide a Shariah-compliant alternative to conventional insurance, ensuring participants avoid Riba (interest), Gharar (excessive uncertainty), and Maysir (gambling).
   • Microtakaful not only aims to be Shariah-compliant but also focuses on social impact by enhancing financial inclusion and providing safety nets to economically vulnerable groups.

How Does Microtakaful Work?

The operational model of microtakaful is fundamentally different from conventional insurance. Here’s a step-by-step breakdown of its mechanism:

1. Risk Pooling: Participants contribute small, affordable premiums into a collective pool, which is used to cover potential losses or damages. These contributions are considered donations and thus embody the Islamic principle of charitable giving and mutual assistance.
2. Takaful Operator: A takaful operator manages the pool. The operator is responsible for ensuring that the fund is used properly, adhering to Shariah principles, and overseeing claims and compensation. Importantly, unlike conventional insurance, the operator does not own the fund but acts as a custodian or manager.
3. Shariah Compliance: The operations of microtakaful are governed by a Shariah board, which ensures that all transactions remain free from interest (riba), uncertainty (gharar), and gambling (maysir). Investments made with the pooled funds must be in halal (permissible) ventures, avoiding industries like alcohol, gambling, and tobacco.
4. Surplus and Deficit Handling: Any surplus in the takaful fund (after claims and expenses) can be distributed to the participants as dividends or reinvested to increase the fund’s capacity. In the case of a deficit, the takaful operator may provide an interest-free loan (qard hasan) to the pool to cover the shortfall, which is subsequently repaid.
5. Claims and Compensation: When a claim is made, compensation is paid out from the collective pool. The focus is on solidarity and support among the members rather than on profit-making.

Benefits of Microtakaful

Microtakaful has several advantages, particularly for low-income communities:

• Accessibility: It provides financial security to those who may not afford or access traditional insurance products.
• Community Empowerment: By promoting mutual assistance, microtakaful strengthens community ties and resilience.
• Economic Stability: It helps stabilize the economic conditions of individuals and small businesses by mitigating risks and providing support in times of need.

Challenges and Future Prospects

Despite its benefits, microtakaful faces challenges such as low awareness, regulatory hurdles, and the need for more tailored products to meet diverse needs. However, the potential for growth is significant, especially in countries with large underserved Muslim populations. As awareness and understanding of microtakaful increase, it is expected to play a more prominent role in global Islamic financial services.

In conclusion, microtakaful represents a pioneering approach to financial inclusion, blending traditional Islamic principles with innovative risk-sharing mechanisms to protect the most vulnerable. Its expansion can lead to more equitable access to insurance and contribute to the broader economic empowerment of disadvantaged communities worldwide.