Islamic banking gaining ground

Islamic banking has been growing steadily in Bangladesh in recent years, and this trend is expected to continue. Islamic banking refers to a banking system that operates on the principles of Islamic law or Shariah, which prohibits interest-based transactions and promotes ethical financial practices.

One of the primary reasons for the growth of Islamic banking in Bangladesh is the country's predominantly Muslim population. Bangladesh is the world's third-largest Muslim-majority country, with over 90 per cent of the population being Muslim. As a result, there is a significant demand for Islamic financial products and services in the country.

Moreover, the government of Bangladesh has been supportive of the growth of Islamic banking in the country. In 1983, the Islamic Bank Bangladesh Limited (IBBL), the country's first Islamic bank was established. Since then, the authorities concerned have taken several measures to promote Islamic banking, including the introduction of tax incentives for Islamic financial institutions and the establishment of a separate regulatory authority for Islamic banking.

Another reason for the growth of Islamic banking in Bangladesh is the increasing awareness among consumers about the benefits of ethical and socially responsible financial practices. Islamic banking promotes ethical financial practices, such as profit-sharing and risk-sharing, which are in line with Islamic principles. These practices are increasingly appealing to consumers who are looking for financial products that align with their values.

The Business Post recently ran an online report citing Islamic banking as growing steadily in Bangladesh.

Among different segments of Islamic finance in Bangladesh, Islamic banking dominates with around 26 per cent share in deposit and investment of the total banking sector, according to a report of the Bangladesh Bank titled ‘Development of Islamic banking in Bangladesh October-December 2022’.

Data from 2011 to 2022 shows the total amount of deposits saw over fivefold increase during this period. Due to high demand, the number of Islamic banks is rising though there is a rush from conventional banks to open separate Islamic banking branches and windows as well.

In 2011, the total deposit of Islamic banks was Tk 74,029 crore, which was 16.63 per cent of the total deposit in the banking sector. It increased to Tk 4,09,949 crore in December 2022, and the share was 25.81 per cent of the total bank deposit.

Furthermore, Islamic banking in Bangladesh has been able to attract a significant amount of foreign investment. Several international Islamic banks have set up operations in Bangladesh, which has helped to increase the sector's competitiveness and provide consumers with a wider range of financial products and services.

Despite the growth of Islamic banking in Bangladesh, there are still some challenges that the sector faces. One of the main challenges is the lack of awareness among consumers about the benefits of Islamic banking. Many consumers in Bangladesh are still not familiar with the principles and practices of Islamic banking, which can make it challenging for Islamic financial institutions to attract customers.

Another challenge is the shortage of skilled professionals in the Islamic banking sector. To address this issue, the government and private sector institutions need to invest in training and development programmes to create a skilled workforce that can support the growth of the sector.

In conjunction with that Islamic banking is growing steadily in Bangladesh, driven by the country's predominantly Muslim population, government support, and increasing awareness among consumers about the benefits of ethical financial practices. The sector still faces some challenges, but with the right policies and investments, it has the potential to contribute significantly to the country's economic growth and development.

In light of the aforementioned points, it can be stated that the growth of Islamic banking in Bangladesh is a positive trend, and with the right policies and investments, the sector can continue to flourish and contribute to the country's economic development.