Saudi investment in Sammilito Islami Bank has yet to materialize due to certain deficiencies, according to officials. The prospective investors have listed asset quality, non-performing loans (NPLs), and capital inadequacy of the bank as risk factors.
Still, no concrete investment offers or pledges have been submitted by any potential backer at this stage.
Investment Opportunities
The Finance Ministry has created a five-person panel, with the central bank governor at its helm, to engage with Saudi Arabia’s investment officials and prospective investors in order to explore potential strategic investments.
A meeting was recently held with Prime Minister’s Adviser for the Ministry of Finance and Planning Dr Rashed Al Mahmud Titumir in the chair to determine the course of actions regarding the potential strategic investment by Saudi Arabia in the bank.
Nazma Mobarek, Secretary of the Financial Institutions Division, told the meeting that Saudi officials had analyzed Bangladesh’s investment potential favorably, citing the country’s market scale, Islamic banking growth, government backing, and the bank’s recapitalization efforts.
Risks and Challenges
However, Saudi authorities also flagged concerns over asset quality from the merged banks, high levels of non-performing loans, insufficient provisions, weak capital reserves, governance issues, management shortcomings, and an unclear financial valuation.
Sources said the meeting discussed the necessity of establishing communication and conducting discussions with the Ministry of Investment of Saudi Arabia and prospective investors, reviewing the assets and liabilities of Sammilito Islami Bank, state of NPLs, provisions against NPLs, capital adequacy, and actual financial valuation of the bank.
The Dr Yunus-led interim government formed the Sammilito Islami Bank in November last year by merging five private banks- First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and EXIM Bank. These banks needed mergers as their nearly 77-percent credits turned NPLs amounting to some Tk 1.47 trillion, after being extensively looted by the then owners, led by Chittagong-based business conglomerate S Alam Group. The new shariah-based bank’s authorised capital was set at Tk 400 billion while the paid-up capital Tk 350 billion.
Of the paid-up capital, the government has provided Tk 200 billion as equity. The government is now looking for foreign investments to give the state-run Shariah-based bank a lifeline. As part of this effort, the government has officially initiated discussions with Qatar and Saudi Arabia. Moreover, the government intends to hold talks with other interested Muslim countries to secure investment for the bank. “We want to divest the bank’s ownership,” Rashed Al Mahmud Titumir said in August.
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