Most appropriate profit distribution method for Islamic banking: ISR Vs Weightage

Abstract

Just like the Middle East, the Islamic Banking is a growing market for Bangladesh as well. In the past few years, some of the banks have started Islamic banking in a full-fledged manner. Islami Bank Bangladesh Ltd is a notable example of a full-fledged Shari’ah banking. On the other hand, there are other banks which have assessed the market potential of Islamic Banking in Bangladesh and jumped on to the train by opening a Islamic Banking wing aside from their conventional banking. City Islamic and MTB Yaqeen are some of them. In this study, we have analyzed the most suitable profit distribution mechanism for Islamic banks. Because, many conventional banks of Bangladesh follow a common method named weightage. But a question remains as to how appropriate or ideal is this method for Islamic banking. This study is a compare and contrast of two profit distribution methods named ISR and Weightage. It is an effort to make the readers understand which of the method is more Shari’ah compliant.