Monzer Kahfdepartment of financial engineering has a big role to play in inventing new
investment vehicles, especially vehicles that fit off-balance sheet investments.
Although most Islamic banks pay little attention to it, the marketing
department has a key role in the bank’s ability to attract both deposits and
investments. It is the department that is directly responsible for the
promotion and growth of the bank’s business. It formulates the strategy and
policies of presenting banking services to clients and potential customers in
order to achieve qualitative shifts and continuous increases in the number of
customers and the volume of their transactions in a measurable and
accountable manner.
4.4 Preservation of Bank’s and Customers’ Assets
This is the responsibility of the departments of liquidity and investment
under direct supervision of the top management of the Islamic bank. The
most import aspect in functioning of this department is a strict commitment
to sound banking practices: adherence to self-established red lines that apply
to both the departments and the top management, diversification of invested
assets, choice of investment opportunities, maintenance of appropriate
equities/assets ratio and creation of necessary reserves to stabilize the
distribution rates to the mudarabah account holders and to shareholders. An
illuminating example is the reserve fund for investment risk that is crated by
Bank A. This fund enabled the bank to absorb the “ups and downs” in
investment returns without violating the tenets of Shari[ah. In 1994, bank A
invented another idea by creating an internal mutual insurance fund to
overcome the problem of bad debts. This fund insures the bank’s debtors
against non-commercial risks.^16 Both funds assist the Islamic bank to manage
risks and to preserve customers’ deposits, just as the general and mandatory
reserves provide the same services and play the same role with shareholders’
equities.
4.5 Providing Humanitarian and Social Services
Integration with its local environment and the community is an
important factor of success for the Islamic bank. This must be a more
emphasized characteristic of Islamic banks than their conventional
counterparts, since the raison d’être of the former is to accommodate the
community’s faith and beliefs. Research studies have shown that the more
community sensitive a bank is the more profitable it will be in the long run.
The social and humanitarian responsibilities of Islamic banks are, no doubt,
bigger than their conventional counterpart because of the moral values and
societal ideals to which they adhere aside from the ones obligated by