Islamic banking in Bangladesh


Mohammed Arifeen

Islamic banking is growing rapidly in Bangladesh with a market share of about 20 percent, though the country does not have a full-fledged law for the sector, according to a research. “Islamic banking is profitable from all aspects,” says the research paper of the Bangladesh Institute of Bank Management (BIBM).The paper was shared at a workshop on ‘Islamic banking operations of banks’ at the institute in Dhaka.
The research shows that the net profit margin for conventional banks was 1.9 percent in 2016 against 3.6 percent for Islamic banking. Similarly, incomes against all assets were 5.5 percent for general banking and 7.3 percent for Islamic banking. The default rate on loans is also low in Islamic banking. The default rate on loans for general banking was 9.2 percent, but it was 4.3 percent for sharia-based banking.
According to a statement of BIBM, Bangladesh ranks 10th in the world in terms of Islamic banking.
Propaganda that Islamic banking is financing terrorist activities has emerged as a major challenge both in Bangladesh and internationally, the study report says.
The absence of comprehensive Islamic banking laws and service diversification, and a lack of skilled workforce are also major challenges confronting Islamic banking in Bangladesh, it says. The study report calls upon bankers to remain alert about terror financing. Bankers should be transparent on the issue and follow guidelines.
Speaking at the workshop, Abu Hena Mohd Razee Hassan, a deputy governor of Bangladesh Bank, says Islamic banking is an important segment of banking in Bangladesh.”Islamic banking lacks a complete law although there are some directives on the sector,” he said, adding that the central bank is working on the matter. The deputy governor said non-Muslims account for 60 percent of clients of Islamic banking around the world.
BIBM Director General Toufic Ahmad Choudhury said a significant number of banks are running Islamic banking operations in Bangladesh, but the members of banks’ sharia council have a lack of knowledge and competency on this type of banking.
Md Azizul Haque, an expert on Islamic banking, urged sharia-based banks to be professional. Sometimes, it is observed that Islamic banking becomes religion-based rather than being professional, he said. “It is dangerous.”It is difficult to implement Islamic banking at banks where the sharia council is not strong, he added.
Helal Ahmed Chowdhury, supernumerary professor at BIBM, said Islamic banking has to be designed in light of the banking company laws so that all banks come under a common platform.
Md Yasin Ali, another supernumerary professor of the institute, said Islamic banking services are normally provided using a religious sentiment. “Many are taking advantage of this religious sentiment to fool clients. This type of activities will not bode well for Islamic banking.”

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