Fixing the crisis at SIBL

Social Islami Bank PLC (SIBL) was once the flagbearer of Shariah-compliant banking in Bangladesh. However, it quickly gained national notoriety for all the wrong reasons. Billions of taka were unceremoniously siphoned off through questionable loans to a politically influential conglomerate. What was meant to be a bank founded on ethical and Islamic values turned into an institution known for reckless lending. The crisis was so profound and the loss of trust so deep that depositors rushed to withdraw their money, like passengers abandoning a sinking ship. This episode underscores how insecure governance, weak regulations, and political influence can jeopardise the entire financial system.

Yet, a broken bank can be restored if the right measures are taken. One effective approach would be the creation of a government-backed Asset Management Company (AMC) to take over SIBL's toxic and nonperforming loans. This approach is akin to isolating infectious patients in a hospital to prevent disease spread. South Korea successfully employed this model after the 1997 Asian Financial Crisis, and Bangladesh could adopt a similar strategy for SIBL. By cleaning up the bank's balance sheet, SIBL could resume normal operations and attract new, creditworthy customers.

Strategic recapitalisation is also critical. Bangladesh Bank should invite respected local and international investors to inject capital by subscribing to shares. These new investors must be free of political ties and embody ethics and transparency. Think of them as skilled doctors stepping in to save a critically ill patient. They will restore capital and public trust. Meanwhile, all stakeholders involved in the scandalous activities must be legally removed. An independent board of directors, comprehensive audits, and strict oversight must be mandatory. No board member should have ties to borrowers. SIBL must also commit to full transparency by regularly publishing reports and disclosing the names of large loan recipients, ensuring the bank has nothing to hide.

Atikur Rahman

Student

BBA Department

North South University

atikur.rahman.nsuf@gmail.com