Assessing the Islamic Bank Operations in Tanzania: a Study of Amana Bank Dar Es Salaam
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The University of Dodoma University of Dodoma Institutional Repository http://repository.udom.ac.tz Business Master Dissertations 2015 Assessing the Islamic bank operations in Tanzania: a study of Amana bank Dar es salaam Mpalangulu, Madina M. The University of Dodoma Mpalangulu, M. M. (2015). Assessing the Islamic bank operations in Tanzania: a study of Amana bank Dar es salaam . Dodoma: The University of Dodoma. http://hdl.handle.net/20.500.12661/1064 Downloaded from UDOM Institutional Repository at The University of Dodoma, an open access institutional repository. ASSESSING THE ISLAMIC BANK OPERATIONS IN TANZANIA: A STUDY OF AMANA BANK DAR ES SALAAM By Madina M Mpalangulu A Dissertation Submitted in Partial Fulfillment of the Requirements for the Award of the Degree of Masters of Business Administration of the University of Dodoma The University of Dodoma October, 2015 CERTIFICATION The undersigned certifies that has read and hereby recommends for acceptance by the University of Dodoma dissertation entitled: “Assessing the Islamic Bank Operation in Tanzania: A Case of Amana Bank Dar es Salaam” in partial fulfillment of the requirements for the Degree of Masters of Business Administration of the University of Dodoma. ……………………………………. Dr N. Viswanadham (SUPERVISOR) Date ……………………………… i DECLARATION AND COPYRIGHT I, Mpalangulu Madina M. do hereby declare to University of Dodoma that this dissertation is a result of my own original work and that it has not been submitted for any degree award in any university for the award of the Degree of Masters of Business Administration. Signature: …………………………..… No part of this dissertation may be reproduced, stored in retrieval systems or transmitted in any other forms or means. Photocopying, electronic or mechanical recording or otherwise without the prior permission of the author or University of Dodoma on behalf. ii ACKNOWLEDGEMENT The finishing point of this study makes me recognizable with other people with unlike category in life. Those people who helped me in different ways discharge the study. I become conscious that without the help of these people I would not complete this work. In view of that, I express the cordial thanks to the Almighty God for giving me life and strength. I recognize the subsequent people and organizations that provided assistance during this study. Without their support this work would not have been possible. First and foremost, I deeply thank Dr. N. Viswanadham for his help, guidance, liable and resourceful scholarly contribution to make this study feasible. He undertook the last of guiding me from the initiation of the study during its execution through to the final write up of the Dissertation. The constructive criticism suggestions and encouragement motivated me to hard work. With the deepest gratitude I wish to thank every person who has come into my life and inspired, touched and illuminated me though their presence. Thus, I am grateful to my parent (Toshi S. Mtambuzi), who invested the little he had in my life. What can I give in return that equals to what you gave me? Absolutely nothing! with regular love accept my tons of thanks that come from the bottom of my heart. You always kept me moving. My special heartfelt goes to my children (Nasiima, Abubakari, Rashiiki and Murjah) and to my all sisters for their tolerance and inducing unavoidable income nie -es coursed to them during the periods of study. For generously sharing their wisdom, love and divinity, I pay honor to appreciation to Amana bank staffs in responding during data collection. May the Almighty God bless them. iii DEDICATION This study is dedicated to my lovely husband Mr Moshi Bilingo. iv ABSTRACT The study was focused in assessing the operation of Islamic bank in Tanzania. The objective of the research is to discover operation of Islamic bank is it brings profit. The study area was chosen because of being convenient to the researcher in acquiring data because the main branch of the bank is allocated there. Nevertheless, on these study is a new field in Tanzania, fewer has been done on Islamic bank. Preferences for the achievement of the company; hence, requiring a study, hence the researcher develop the interest on general objective of the study on operation of the Islamic bank. Employed was Cross-sectional research design in the methodology in involving a sample size of 60 respondents. As its methodology this investigation used data collection such as questionnaires, observation and reading official documents. Data collected were analyzed descriptively by SPSS software by using the figures and tables. The findings show that Islamic bank operation create profit because use financial contract which is create profit also its role create profit to society, includes: to clear and settle payments; to aggregate (pool) and disaggregate wealth and allow the flow of funds so that both large-scale and small-scale projects can be financed; to transfer economic resources over time, locations and sectors; to accumulate, process and disseminate information for decision-making purposes; to provide ways for managing uncertainty and controlling risk; and to provide ways for dealing with risk and return issues that arise in financial contracting. These roles can be performed by offering financial transactions, pooling savings and channeling funds. By performing these roles, Islamic banks play a valuable and integral part in the development of the national economy by creating wealth for individuals and the community. v DEFINITION OF TERMS Salam: A contract in which bank made advance payment for goods/services to be delivered at future date. Istisna: A contract of credit sale that allows future payment for manufacturing goods for future delivery. Muajjal: A financing contract in which bank purchase goods to be sold to customer by showing the purchase price and profit margin. Qarz/Qarz-e-Hasna: A debt, which is given without any interest or benefit to meet the financing need. Diminishing Musharika: A partnership deed in which one party (banker) transfers (partnership) share to the other party (customer) with the passage of time. Riba: Any excess amount or benefit (than principal amount) given by the debtor for debt or kind Sharia’h: A set of instructions consists of the Holy Quran, Sunnah, Ijmah and Qiyas for every walk of life. Mudarib: Partnership deed between investor and bank to provide competency & skills to share profit/ lose Musharka: A partnership agreement in which all partners contribute capital and work to share profit/loss. Mudaraba: A partnership agreement in which some partners contribute capital and others contribute their competencies to share profit or loss according to an agreed ratio. Ijarah: A lawful consideration as rent for hiring an asset or reward for hiring. vi TABLE OF CONTENTS CERTIFICATION ..................................................................................................... i DECLARATION AND COPYRIGHT ................................................................... ii ACKNOWLEDGEMENT ....................................................................................... iii DEDICATION .......................................................................................................... iv ABSTRACT ............................................................................................................... v DEFINITION OF TERMS ...................................................................................... vi TABLE OF CONTENTS ........................................................................................ vii LIST OF TABLE....................................................................................................... x LIST OF FIGURES ................................................................................................. xi LIST OF ABBREVIATIONS AND ACRONYMS .............................................. xii CHAPTER ONE...................................................................................................... 13 INTRODUCTORY CHAPTER ............................................................................. 13 1.0 Introduction .................................................................................................... 13 1.1 Background of the study ................................................................................ 14 1.1.1 Historical Perspective .................................................................................... 14 1.1.2 Present scenario.............................................................................................. 17 1.2 Statement of the Problem ............................................................................... 18 1.3 Research Objective ........................................................................................ 20 1.3.1 General Objective .......................................................................................... 20 1.3.2 Specific Objectives ........................................................................................ 20 1.4 Research Question.......................................................................................... 21 1.5 Significant of the Study.................................................................................. 21 1.5.1 To Research.................................................................................................... 21 1.5.2 To Banking Institution ................................................................................... 21 1.5.3 To the Customer