A Study on the Problems and Prospects of PLS Modes of Financing: Bangladesh Perspective.

Posted on May 21, 2011 at 1:55 AM

Executive Summary:

The lack of profit and loss sharing (PLS) financing is a global phenomenon affecting Islamic banks worldwide. This paper analyzes problems faced by Bangladesh’s Islamic banks using the Analytic Network Process (ANP) methodology. The preliminary step is to decompose the problem through questionnaires and in-depth interviews with customers (Borrower) and practitioners of Islamic banking to fully comprehend the envisaged problem and develop an appropriate ANP network. The study evaluated and measured the model using pair-wise comparisons and then to synthesize in order to find solutions. The root of the problem can be grouped into two aspects, namely Islamic bank internalities, which include upper management, human resources and technical aspects, and externalities that include society, the authorities and customers. The results show that internal problems have major influences in human resources (target oriented; risk averse) then upper management (business oriented; averse to risk) as well as technical aspects (higher risk; more complicated), while external problems have expanded largely regarding the Authority (lack of supportive regulations; incentives). The policies to be instituted by regulators should include not only directed market-driven policy, but also Shariah compliance. Moreover, the operational strategies for market development that should be implemented include service improvement programs as well as socialization and communication programs to address the most acute internal and external weaknesses of Islamic banking and PLS based finance in Bangladesh.

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Categories: Education, Business, Aticles

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