Islamic banks continue to make an important contribution to the country’s economy. Conventional banks have provided banking services for a long time and in the last four decades, Islamic banks have created a strong position among customers with their services and trust.
Recently, various news about Islamic banks, bank deposits, investments and even rumours of bank bankruptcy, and bank money laundering are confusing among people. Some common customers are also suffering by withdrawing money from banks due to rumours.
Bangladesh Bank has already given some steps and statements on the matter, as a result of which people are gradually getting relief. Apart from that, the researchers believe that there are various weaknesses in the banking sector, an increase in defaulted loans, various irregularities and structural weaknesses in the field of good governance and order.
At present, 10 full-fledged Islamic banks are continuing their activities in the country. Islami Bank Bangladesh Limited is the first Islamic Shariah-based bank in the country; they started operations in 1983. Inspired by the success of the institution, more Shariah-based banks have been established in the country.
Some conventional banks have converted to Islamic banking. Many banks have opened Islamic banking branches and windows. Currently, 10 full-fledged Islamic banks are Islami Bank Bangladesh Limited, ICB Islami Bank Limited, Al ArafahIslami Bank Limited; First Security Islami Bank Limited, Social Islami Bank Limited; Exim Bank of Bangladesh Limited, ShahjalalIslami Bank Limited; Union Bank Islami Bank Limited, Standard Bank Limited, Global Islami Bank Limited. So far, five conventional banks have been converted into Islamic banks.
11 conventional banks have launched Islamic banking branches. 13 conventional banks are providing services by opening Islamic banking windows.
Islamic banks have been developing and growing rapidly in the last four decades. Islamic banks control about 30 percent of the country’s banking sector, although no legislation has been enacted for Islamic banking so far.
They are moving forward based only on a guideline and some instructions issued by Bangladesh Bank in 2009. At present, the total deposits of Islamic banks are four lahks 21 thousand 375 crores, which is 27 percent of the total deposits of the banks. The total investment of Islamic banks is Tk 387 thousand 221 crore, which is 29 percent of the total investment in the banking sector.
Islamic banks continue to contribute a lot in remittances. 38 percent of total remittances coming through banking channels are coming through Islami Bank. Islami Bank Bangladesh Limited is leading in terms of deposit, profit and operating investment in the Islamic banking system.
About 12 percent of the total investment of the country is the investment of Islami Bank. Islami Bank Bangladesh Limited is at the top of foreign exchange. 29 percent of the foreign exchange that comes from all over the world comes through Islamic banks. Among the top 1000 banks in the world, Islami Bank Bangladesh Limited is the only one in Bangladesh.
The contribution and importance of the country’s banking sector in this context of the economy are great. Because one of the sectors of capital supply in the economy of Bangladesh is the banking sector. In this context, if a deposit crisis occurs in Islamic banks, it will harm the overall economy.
In this case, since the Islamic banks are carrying 27 percent of the deposits, these institutions should invest in the proper custody of the deposits, i.e. in the proper way. If there is a problem in the Islamic banking sector, it will have an impact on the entire economy. Islamic banking in Bangladesh is gaining popularity day by day. Demand for Shariah-based products is increasing.
As a result, conventional banks are also leaning towards Shariah-based activities. Despite the rapid development of Islamic banking in the last four decades, it has not fully benefited the public welfare or the people.
To deliver the benefits of Islamic finance to everyone’s homes, Islamic banking should not only be kept within specific boundaries. A specific law should be made for that. Social welfare Islamic tools, including Zakat, interest-free financing, and waqf, must be used, and areas must be created.
After 1960, Muslim countries, after liberation from colonialism, focused on introducing Islamic finance. As a result, the world’s first Islamic bank started in Dubai. In 1975, the journey of the first Islamic banking began.
Islamic banking also started in Pakistan in 1975. There are also laws for Islamic banks. Islamic banking was first legislated in Malaysia. After that Islamic banking started. Currently, Islamic banking accounts for about 30 percent of the banking sector in Malaysia.
This banking is developing under government patronage. Although Islamic banks control 30 percent of the banking sector in Bangladesh, there is no specific law on Islamic banking. An Islamic bond named Sukuk was launched in 2020, but no other products have been developed. Safeguards to protect deposits and reduce investment risk in these banks are weak.
Controlling large chunks of deposits and investments, but no tools to deal with crises. In case of a liquidity crisis, Islamic banks cannot borrow from the money market like conventional banks. While conventional banks get the opportunity of idle liquidity security through reverse repo and purchase of treasury bill bonds, Islamic banks are deprived in this field. Therefore, Islamic banking should develop specific Islamic financial tools for the security of deposits and investments.
The central bank should have a specific framework to get the benefits of this popular banking like the Islamic banking system. Also, there should be a strong central Shariah Board to oversee Shariah activities. Efforts should be made to acquire the necessary knowledge and training of Bangladesh Bank officials and officials of Islamic banks on Shariah compliance. The best foundation of the principles of Islamic banking is verses 275-277 of Surah Baqarah of the Holy Quran. Here it is said, “Those who take usury are like those on whom the devil relies.” This is because they say buying and selling is like usury. But Allah has made buying and selling halal and usury forbidden.
That is, one of the basic principles of Islamic banking is to stay away from haram do Shariah-compliant business, and do public welfare by distributing wealth evenly. According to the Asian Development Bank, Islamic banking is rapidly gaining popularity worldwide. Global Islamic finance is more than $2.88 trillion.
Islamic finance can play a lot of stability and constructive role in the economic system. This system is necessary to eliminate various inequalities and wealth inequality in the society. However, Islamic banking is only a part of Islamic finance. So, it is not possible to reach the benefits of the Islamic finance system only through Islamic banking. However, researchers and analysts, along with regulatory bodies, should play a role in removing the obstacles and addressing the challenges in the proper implementation of Islamic banking.—Daily Observer
