Malaysia-based Islamic Finance News (IFN), the world's leading Islamic finance news provider, recently published a special country report on Bangladesh's growing Islamic banking titled "Islamic banking practices and potential: Bangladesh's perspectives".
"Bangladesh has experienced extraordinary growth in Islamic banking following strong public demand for the system. Since its inception in 1983, the Islamic banking industry has recorded a strong performance and the industry now accounts for more than a 20 per cent market share of the entire banking industry in Bangladesh," the IFN article said.
It said at present, 43 per cent of existing commercial banks are directly involved in the running of their Shariah-based banking business. As the growth of Islamic banks in Bangladesh is fast increasing, there is a possibility that the Islamic banking industry of Bangladesh could lead in the Islamic banking sector globally in the near future.
"The government of Bangladesh, therefore, should pay more attention to developing the country's Islamic banking sector", the IFN said.
Regarding challenges and way forward of Islamic banking, it viewed, "It is necessary to develop supportive insurance, legal and tax codes, and create a harmonised regulatory framework based on Islamic law, which is critical for the Islamic banking industry in Bangladesh and it is very important for the Islamic banking industry in Bangladesh to introduce the practice of securitisation in the form of Sukuk.
Properly developed securitisation has huge potential benefits for Islamic finance in Bangladesh. A global policy for the pricing of Islamic financial products and a uniform accounting standard are needed globally. There is also a need to establish appropriate risk and liquidity management techniques and to have greater clarity around Shariah-based legal and tax restrictions".
"Despite various limitations, the Islamic banking system has tremendous potential and prospects in Bangladesh. Islamic banks have brought together many depositors and entrepreneurs under their umbrella. For the greater interest of the country, as per the aforementioned guideline on Islamic banking, Bangladesh is operating and expanding the current Islamic banking network along with the conventional banking system to invest in various socioeconomic sectors to boost economic development of the country and move toward social well-being and wealth- generation activities in society under Shariah."
"It is hoped that the present robust growth of Shariah-based banking practices in the Islamic banking system will lead to further infrastructural development in Bangladesh and bring better well-being to society compared to other financial and banking systems to achieve the ultimate goal: turning Shariah's potential into reality,' the IFN article also opined.
Md. Touhidul Alam Khan, Deputy Managing Director & Chief Business Officer of Prime Bank Limited authored the article.
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