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Present Challenges and Future of Islamic

Finance and Banking in Bangladesh
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Table of Content

Chapte Topic Page no

r
1 Introduction 3
2 Background 3
3 Literature Review 4
3.1 Overview 4
3.2 Search Strategy and Database selection 5
3.3 Inclusion and Exclusion Criteria 5
4 Outcome of The Literature Review 5
4.1 Challenges of Islamic Banking in Bangladesh 6
4.2 Future of Islamic Banking in Bangladesh 7
5 Conclusion 8
6 References 8
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1.Introduction
Islamic banking or Islamic finance is banking or financing action that follows sharia and its
viable application through the advancement of Islamic financial aspects. The development of
Islamic banking in Bangladesh is advancing step by step. The momentous move or
transformation of the ordinary banks and their branches into Islamic lines gives the sign of high
acknowledgment of the interest free banking by the general population in general. For a
proceeded with development of the Islamic Banking framework, notwithstanding, various issues
that present significant issues for Islamic banks should be painstakingly tended to.

The objective of the current paper are two-overlap: first, to survey present status and difficulties
of Islamic banking in Bangladesh and second, to advance strategy choices to fabricate a sound
Islamic finance design fit for satisfying up the developing need of Islamic monetary items.

2.Background
The last half of the 20th century saw a significant move of speculation in concocting banking
strategy and system based on Islamic Shariah. This groundbreaking idea was systematized
toward the finish of the second from last quarter of the century and arose as another arrangement
of banking called Islamic banking. The foundation of the Islamic Development Bank (IDB) in
1975 offered energy to the Islamic Banking development. Since the foundation of IDB, various
Islamic Banking and monetary organizations have been set up everywhere on the world
regardless of Muslim and non-Muslim nations. In the course of recent many years, the Islamic
monetary industry has quickly extended around the world.

Islamic banking as another worldview began in Bangladesh in 1983 with the foundation of the
primary Islamic bank "Islami Bank Bangladesh Limited". From that point forward, 6 additional
banks have been set up in the nation to arrive at the result of this government assistance banking
to the doorsteps of individuals. In the previous thirty-eight years, it has shown its incredible
power in accomplishing the objective of Islamic Shariah. Noticing the achievement, numerous
customary banks have been appealed to open their own Islamic branches with the conventional
ones.
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3.Literature Review
3.1.Overview
This research is done in Systematic Literature Review (SLR) order in order to maintain a
systematic and valid research. This review will observe the standards of SLR isolating the
research into three essential stages:

• Planning the survey,

• Conducting the survey with the assurance of studies from electronic databases

• Reporting final solutions

I followed SLR procedure for this exploration in light of the fact that SLR licenses the
combination from informational collections restrictively, which allows a research with lower
inclination than customary reviews. In any case, there was a restriction that Numerous studies
didn't give acceptable abstracts of the included research.
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3.2.Search Strategy and Database selection

To do this research, in the Google Scholar, I used to writing ‘Islamic Banking’, ‘Islamic Banking
in Bangladesh’, ‘Islamic Banking Challenges Bangladesh’. I got numerous works there. I got
data from the connections and many exploration paper from that point. After that I looked
through composing ‘Future of Islamic Banking Bangladesh’. I likewise gathered information
from the refers to of these papers.

From google scholar, I selected seven papers in order to continue this research. I found many
papers in google scholar for Islamic Bank but they were not that much relevant to my research.
So after cutting down several papers, I selected seven papers for further research.

3.3.Inclusion and Exclusion Criteria

To achieve the objective of the paper, the necessary data/information have been gathered from
some sources. The optional sources included various reports of Bangladesh Bank, Islamic Banks
and other public and global Research Organizations, and insightful articles distributed in
homegrown and International Journal. Monetary proportions have been utilized to survey the
situation with Islamic banks and make correlation with the traditional banks.

4.Outcome of The Literature Review

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4.1.Challenges of Islamic Banking in Bangladesh

There are challenges of Islamic Banking in Bangladesh.
 Nonappearance of Separate law:
There is no different demonstration in managing Islamic financial industry in
Bangladesh. Bangladesh Bank as a national bank practices authority over Islamic banks
under certain statements fused in the Bank Company Act, 1991 (last corrected in 2013)
which is utilized to control and direct revenue based customary banks. Accordingly, civil
courts are not adequately prepared to deal with questions made in the activities of Islamic
Banking in Bangladesh.
 Small Share of Financing in social areas:
An investigation of speculations made by Islamic banks uncover that huge firms rule
intensely in Islamic banks industry in Bangladesh. Miniature, little and medium
endeavors and microfinance for neediness mitigation programs don't get decent amounts
(Khan, Tariqullah and Mohomed 2017)
 Absence of Role in Government Project Financing:
Bangladesh Government gets from regular banks through depository bills and bonds to
fund numerous improvement projects towards higher comprehensive development and
occupations creation. Despite the fact that Islamic banks pay gigantic measure of asset to
Government depository as corporate and other duty consistently, they can't take part
openly projects as financer because of absence of Shariah based instruments and
legitimate system.
 Paucity of Number of Islamic Insurance organizations:
The smooth progression of Islamic banking can't support without the guide of Islamic
insurance agencies, takaful (Khan, I., Rahman 2016). There are just three general takaful
organizations which are inadequate for Islamic banks to ensure speculations against
unanticipated risks and calamities. Much of the time identifying with protection matters
of exchange and business, Islamic banks need to rely upon revenue based insurance
agencies without takaful.
 Scarcity of Skilled Human Resources:
In Bangladesh, the Islamic financial industry experiences seriously deficiency of gifted
human sources having better understanding the vital ideas of Shariah based monetary
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administrations. Islamic brokers have greater difficulties than those working in ordinary
banks as they need to get information and mastery in activities in banking just as in
Islamic Shariah identifying with monetary exchanges.
 Absence of Islamic Financial Literacy program:
Notwithstanding the development of Islamic banks throughout the most recent 30 years,
numerous individuals, even old clients of Islamic banks are inexperienced with Shariah
based store and venture items. Most Islamic banks have no monetary proficiency
program to instruct the clients to have understanding the critical ideas of Islamic account.

4.2.Future of Islamic Banking in Bangladesh

A supportable future Islamic banking requires a possible group of Islamic investors, Islamic law
researchers, manageable Islamic financial system, administrative body and solid Islamic Shariah
based capital market. Survey of the issues of Islamic banking when all is said in done and
Islamic banks of Bangladesh specifically represents a difficult component for the advancement
and endurance of Islamic banks in Bangladesh. It requires re-association of the entire monetary
framework, Islamic financial way of thinking, and new financial way of thinking for the Islamic
Banks (Yousuf S, Islam MM, Islam MM (2014)) Islamic banking additionally requires the
accompanying arrangements for legitimate execution of Islamic banks.

1. Pacing for distributional productivity and the Islamic bank can be specific in picking
customers for financing under PLS modes.
2. Current financial Policies and practices: Islamic banks, with the end goal of confronting
the developing rivalry either individual Islamic banks or the regular banks which have
dispatched Islamic financial practices, should adjusts their working in accordance with
present day strategic approaches, however improvement and extension of the scope of
managing in the financial area.
3. Government should think effectively for the advancement of Islamic banking in
Bangladesh considering its pro development job. Bangladesh Bank ought to build up
some Islamic Monetary and Saving instruments and make separate window for
exchanges with the Islamic banks and an undeniable Islamic financial Department for
breaking down, regulating, observing and managing reason, accordingly working with
Islamic banks for their smooth improvement in Bangladesh (Khan T (2017))
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4. Inter Islamic bank co-activity and point of view plan ought to be guaranteed. New
financial way of thinking for the Islamic Banks for decreasing hole between the
principles and practice of Islamic banks in Bangladesh (Abduh M, Hasan SM, Pananjung
AG (2013)).
5. Banking approaches and practices ought to be modernized.

5.Conclusion
Islamic banks can give productive financial administrations to the country in the event that they
are upheld with fitting financial laws, and guidelines. This will help them presenting PLS
methods of activities, which are a lot of helpful for financial turn of events. It would be better if
Islamic banks had the chance to function as a sole framework in an economy. That would give
Islamic financial framework to completely use its possibilities. Studies show that Islamic banks
can't work with its full proficiency level in the event that it works under a customary financial
structure, their effectiveness goes down in various measurements. Islamic banking has been
flourishing in the dynamically developing Bangladesh economy with devoted investment of the
Islamic banks in the monetary consideration crusade. As Shariah is the foundation of the Islamic
financial industry, a complete Islamic lawful framework with clear ground and responsibility is
important to help speed up Islamic monetary industry to spike as it planned for guaranteeing
human government assistance.

Reference
Khan, I., Rahman, N.N.B.A., Yusoff, M.Y.Z.B.M. et al. History, problems, and prospects of
Islamic insurance (Takaful) in Bangladesh.  SpringerPlus  5, 785 (2016)
Md Rasel, Jhensanam Anusara, Bouasone Chanthamith, Ayrin Sultana, Arifin Sultana. Islamic
Banking and Finance in Bangladesh: Potential, Challenges and Future Development. American
Journal of Business, Economics and Management. Vol. 6, No. 4, 2018, pp. 119-126
Hossain, Muktar. Mudarabah in Islami Bank Bangladesh Limited: analysis of applied
principles. MS thesis. Kuala Lumpur: International Islamic University Malaysia, 2014, 2014.
Khan, Tariqullah and Mohomed, Amiirah Bint Raffick Nabee, Ethical Banking and Islamic
Banking: A Comparison of Triodos Bank and Islami Bank Bangladesh Limited (April 1, 2017).
Islamic Economic Studies, Vol. 25, No. S, 2017
Yousuf S, Islam MM, Islam MM (2014) Islamic Banking Scenario of Bangladesh. J Islam Bank
Financ 2:23–29.
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Khan T (2017) Ethical Banking and Islamic Banking: A Comparison of Triodos Bank and Islami
Bank Bangladesh Limited. Islam Econ Stud 25:111–154. doi: 10.12816/0036190.
Abduh M, Hasan SM, Pananjung AG (2013) Efficiency and performance of Islamic banks in
Bangladesh. J Islam Bank Financ 94–106.