The government should formulate a separate law to give Islamic banking a strong legal coverage, experts said on Monday.
At the same time, Islamic banks in the country should look to introduce more Shariah-compliant bonds like Sukuk for better liquidity management, the experts said.
The suggestions came at a workshop on "Islamic Banking Operations of Banks", organised by Bangladesh Institute of Bank Management (BIBM) in Dhaka.
The central bank has guidelines for Islamic banks to conduct their operations.
It is high time we introduce more comprehensive guidelines to bring greater transparency and accountability in the industry, said Associate Professor of BIBM Md. Alamgir.
He was presenting the main review paper of the event.
"Discussion with the relevant scholars revealed that Shikra mode of investment should be the priority to get visible benefits from Islamic banking", Mr Alamgir said.
"However, without a strong legal framework, it is not possible to make the mode popular", he added.
Experts at the event also noted Islamic banks in Bangladesh lack liquidity instruments such as treasury bills and other marketable securities.
"For better liquidity management, more active participation of the Islamic banks in the interbank money market is essential", Mr Alamgir said.
"Therefore, policy makers should think about having bonds like Sukuk or commodity murabaha for better liquidity management", he added.
Researchers said further research is needed to develop Islamic financial instruments, which not only address this liquidity issue but are also able to invest in financing government's fiscal deficits.
Experts at the workshop also called for establishing a separate Shariah Appellate bench in the High Court for handling the cases related to Islamic banking.
They also suggested that a dedicated post of deputy governor could be created in Bangladesh Bank for dealing with Islamic banking operations.
"One problem with the Islamic banking system in Bangladesh is that we have gone directly into practice while not giving much attention to concept", said M Azizul Huq who is an authority on Islamic banking.
"To ensure true benefit from Islamic banking practices, we need to concentrate more on the concept and need to develop human resources with adequate knowledge of Islamic banking", he added.
Speaking at the workshop, deputy governor of Bangladesh Bank Abu Hena Mohd. Razee Hassan said the central bank has already instructed the relevant banks to form separate cells for Islamic banking.
"At the same time, we have made it obligatory to form a Shariah supervisory committee in all Islamic banks and branches", he said.
Managing Director and CEO of Exim Bank Mohammed Haider Ali Miah said that there should be greater product diversification within the Islamic banking for efficient liquidity management.
Supernumerary Professor of BIBM Helal Ahmed Chowdhury, in his speech, noted that Islamic bank was insulated from the crisis during 2008 global financial meltdown.
"As a result, Islamic banking is now viewed as a model for banking throughout the world," he said.
Noting currently all the Islamic banks are using weightage method for their income or profit distribution, experts said that income-sharing method should be introduced.
Income sharing is perceived to be superior to weightage method, they said.
Speakers at the workshop also called for introducing a certification course on Islamic banking to create a large pool of Islamic bankers and to train more Shariah auditors in the country.
