The Islamic banks in Bangladesh are seeking a Shariah-compliant money market and separate laws to govern the fast expanding Islamic banking in the Muslim-majority country. “We have already raised the issue and discussed with the senior officials of the Bangladesh Bank, the central bank of the country,” Mohammad Abdul Mannan, Managing Director of Islami Bank Bangladesh Limited (IBBL), said on Sunday.
Mannan told Reuters in an interview that at the moment around 20 percent business of the banking industry of the country is being handled by shariah-based banks and the scope is widening at a faster pace. The size of the banking industry in Bangladesh is 800 billion taka ($10.7 billion), an official said.
At present seven fully fledged Islamic banks, among which two converted from conventional system, 17 traditional banks through their Islamic banking branches or windows are offering sharia-compliant services to their clients in Bangladesh, and some more are known to be in the process of converting their operations.
“Introducing Islamic money market is a demand of the time to efficiently manage liquidity,” Mannan said.
Islamic banks keep their surplus funds among themselves to avoid interest, which is prohibited as per Islamic shariah principle.
Mannan said Islamic curriculum should be introduced in higher business education courses to overcome lack of skilled personnel in the field of Islamic banking, as well as training for the Islamic bankers at the state-run Bangladesh Bank Training Academy and Bangladesh Institute of Bank Management.
“Islamic banking in Malaysia has got wide recognition in the international arena due to their central bank’s patronization. However, despite substantial market share, our global image seems undersized,” he said.
The Islamic Banks Consultative Forum (IBCF) -- a global body of Islamic financial institutions—is working to strengthen cooperation among member banks, popularize shariah-based banking products and services, and pursue policy guidelines under a common platform.
In 1983 the IBBL started its journey in Bangladesh and since then the growth of Islamic banking has been about 495 percent, showing that the popularity of sharia-based banking system has made tremendous achievements.
“We are trying to popularize the Islamic money market in the country where short-term instruments permissible under the Islamic Shariah are used to borrow and lend money for short period,” Mannan said.
Under the existing rules, Islamic banks maintain 11.50 percent statutory liquidity ratio (SLR) instead of 19 percent for conventional banks as they cannot participate in the treasury bills’ auction and cannot buy any interest-bearing government bonds that involve receipt of interest.
A sharia-compliant money market would create a new window for investment of the Islamic banks’ surplus liquidity. The Islamic banks may also invest their surplus funds in the Islamic bonds that are transacted in accordance with the principles of Islamic rules and regulations, Mannan said.
An initiative to create a mega Islamic Investment Bank has also been launched by the Jeddah-based Islamic Development Bank to promote growth of the Islamic financial industry, global reach and liquidity management with initial capital of $1.0 billion, officials said.