The Islamic Finance Handbook: A Practitioner's Guide to the Global Markets

Chapter 3BangladeshIslamic Finance as a Growing Segment of the Finance Industry

Mohammad Abdul Mannan

Managing Director and Chief Executive Officer, Islami Bank Bangladesh Limited

Islamic finance in Bangladesh is experiencing a faster growth than its conventional counterpart. Banks, insurance companies, and nonbank financial institutions (NBFIs) are among the prime actors in this segment of finance. Of the total 52 (June 2013) scheduled banks in Bangladesh, 8 are full-fledged Islamic banks, 9 are conventional banks with Islamic banking branches, and 8 are conventional banks with Islamic banking windows.

The amount of banking assets and exchange traded funds under Islamic finance is 20 percent of the national finance industry. Although Islamic banks hold 21 percent market share in deposits, takaful holds 12 percent of the insurance market. From 2008 to 2013, Islamic banks grew at a pace of 26 percent per year, surpassing the conventional private commercial banks' 22 percent annual growth. The average annual growth rate of takaful was 30 percent.

The bond market in Bangladesh is the smallest in south Asia. Consisting mainly of public bonds and bills, it stood at BDT753.3 (US$9.77) billion, or 14 percent of GDP, in 2008, compared with India (41 percent), Pakistan (29 percent), and Sri Lanka (38 percent). The share of the Bangladesh bond market in south Asia is 0.2 percent. Sukuk, or Islamic bond, has not yet made headway in Bangladesh. The same is true for the sovereign bond. The ...