Al-Arafah Islami Bank Faces Crisis Over Allegations of Nepotism in MD Appointment
Al-Arafah Islami Bank PLC (AIBL), a Shari’ah-based private sector bank listed on the stock exchange, is facing serious allegations of irregularities, nepotism, and conflicts of interest against its top management and board of directors. The bank’s overall stability is severely threatened, particularly due to controversial decisions that violate established norms regarding the appointment of the Managing Director (MD) and new staff recruitment.
Controversy Over MD Appointment
• Job Circular: On September 2, AIBL published an advertisement in the newspapers for the position of MD and Chief Executive Officer (MD & CEO), stipulating a requirement of at least 10 to 20 years of banking experience.
• Irregular Process: Although a total of 24 experienced bankers applied, no formal interview or selection process was completed.
• Nepotism Allegation: Instead, the bank’s Board of Directors reportedly bypassed the process and secretly sent a proposal to Bangladesh Bank (BB) seeking final approval for the current Acting MD, Rafat Ullah Khan, to be appointed as the MD.
• Conflict of Interest: Rumors within the bank suggest that Rafat Ullah Khan is the brother-in-law of the bank’s Chairman, Khaja Shahriar. The Chairman was allegedly supported in this entire process by another influential Director and Chairman of the Executive Committee (EC), Abdul Wadud. This raises a serious accusation of filling the top position through nepotism, ignoring merit and qualifications.
Questionable Shari’ah Compliance
A fundamental requirement for the MD position in an Islamic bank is at least two years of experience in Islamic banking. However, the proposed MD, Rafat Ullah Khan, has reportedly never worked in an Islamic bank before. This raises serious questions among stakeholders regarding his eligibility to serve in the top management role of a Shari’ah-based financial institution.
Irregularities in Staff Recruitment
It was revealed that the bank’s current Chairman, Khaja Shahriar, previously served as the MD of LankaBangla Finance. Allegations suggest that utilizing his connections from the leasing sector, he has appointed nearly 100 individuals to Executive positions, including those from LankaBangla and other leasing companies, many of whom lack any banking experience. Rumors of large-scale irregularities and recruitment corruption have intensified within the bank due to these appointments.
Worrying Financial Deterioration
Al-Arafah Islami Bank’s financial health has shown alarming deterioration over the past year, clearly reflected in the latest CAMELS rating by Bangladesh Bank:
• Asset Quality & Earnings: As of September 30, the bank’s rating for two crucial components, Asset Quality and Earnings, dropped from ‘3 or Fair’ to ‘4 or Marginal.’
• Overall Rating: The bank’s overall CAMELS rating fell one step from ‘2 or Satisfactory’ to ‘3 or Fair.’
• Capital Adequacy: Furthermore, Bangladesh Bank’s quarterly report for June 30 indicated that the bank’s minimum capital adequacy ratio (CAR) has decreased from 9.83% to 9.02%. This suggests a reduced capacity for risk-taking and raises concerns about a potential future capital shortfall.
A source indicated that an influential group is continuously lobbying Bangladesh Bank for approval of Rafat Ullah Khan’s appointment as the bank’s MD.
