Bangladesh's Islamic finance industry keeps booming with no slowdown in sight


(MENAFN- Gulf Times) Recent news that Bangladesh's central bank
approved the conversion of two more local bank
s to fully-fledged Islamic bank
s warrants taking a closer look at the Shariah-compliant bank
ing and finance industry
in the world's fourth-most populous Muslim country.
According to reports in Dhaka Tribune, The Daily Star and The Financial Express last week, the central bank
of Bangladesh approved applications from two domestic bank
s, Standard Bank and NRB Global Bank, to become fully Islamic bank
s. The two privately-held commercial bank
s so far only operated Islamic windows but sought to convert to fully-fledged Shariah-compliant bank
s to enlarge their scope of product offerings amid growing popularity of Islamic bank
ing in the country and tougher competition on the conventional bank
ing market
. NRB Global Bank said it plans to change its name to Global Islami Bank to underscore its new role.
The move brings the number of fully-fledged Islamic bank
s in Bangladesh to ten, with the others being Al-Arafah Islami Bank, Islami Bank Bangladesh, Exim Bank, Social Islami Bank, Shahjalal Islami Bank, Union Bank, First Security Islami Bank and ICB Islamic Bank. In addition, 19 Islamic bank
ing branches of nine conventional commercial bank
s and 41 Islamic bank
ing windows of seven conventional commercial bank
s are currently providing Islamic financial
services in the country.
Bangladesh is one of the Muslim nations whose impressive growth in Islamic finance has somehow been overlooked in the past. The country with a population of 165mn, of which 91% are Muslim which translates into 8% of the global Muslim population , has experienced strong public demand from the public and from businesses for Islamic bank
ing and finance services basically since the industry
's inception in 1983. According to latest available central bank
data, at the end of the July-September 2019 quarter, total Shariah-compliant deposits at Bangladesh's bank
s reached $30.8bn, a 15% increase over the same quarter of the previous year. This is in line with the 15 to 20% annual growth of the industry
over the past decades and brings the share of Islamic bank
ing deposits close to 24% of the entire deposit volume of the country's bank
ing market
, while the share of loans and financing is even higher at close to 25%. The number of branches of the Islamic bank
ing sector including Islamic branches and windows of conventional commercial bank
s reached 1,301 at the end of the quarter, up from 1,200 in the same quarter of the previous year. Islamic bank
ing now employs more than 36,000 people in Bangladesh, the central bank
said.
'Bangladesh's Islamic bank
ing sector has experienced robust growth due to policy supports and strong public demand, the central bank
noted in its quarterly report. 'Recent issuance of sukuk rules by the Bangladesh Securities and Exchange Commission will promote Islamic capital market
s badly needed for financing infrastructure and industrial projects towards achieving higher inclusive GDP
growth and other sustainable development goals, it added.
Analysts note that the industry
has still high potential for further expansion as Bangladesh enjoys a vibrant economy with GDP
per capita having more than tripled over the past decade to close to $1,800 with an average (nominal) GDP
growth of 6% annually to $288.4bn in 2018. Last year, Bangladesh's economy posted record high growth of 8.1% and is now close to achieving double-digit GDP
growth. Since 2009, the country's economy has grown by 188% in size, and the per-capita income as per purchasing power parity has surpassed $4,000, up from $2,400 ten years ago.
These are very positive preconditions for the Islamic bank
ing and finance market
since foreign investors beyond Indian companies, namely Muslim investors, are beginning to look at the 'Bangladesh boom and seek to identify business opportunities. It is also expected that the Islamic capital market
and the Islamic insurance and microfinance sector will expand in tandem as supportive policies are adopted and implemented. Bangladesh's Islamic finance industry
with the help of its many IT entrepreneurs is now also adopting Shariah-compliant fintech to carry out financial
transactions and processes more efficiently through technological innovations.

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