Bangladesh’s draft law to restrict Islamic banking to dedicated banks only
In a bid to create a level-playing field for Shariah-based banking, a new draft law in Bangladesh will prohibit conventional banks from offering Islamic banking services.
Under the proposed Islami Bank Company Act-2024, banks that wish to provide Shariah-compliant banking must either form a subsidiary or adjust their business model.
Currently, 30 conventional banks provide Islamic banking through 33 branches and more than 600 windows.
The central bank’s move aims to address concerns about fairness.
Conventional banks currently offer interest-based services, while Shariah banks operate on profit-sharing principles.
The new law would require banks to choose between conventional or Islamic banking within six months of the law’s enactment.
Critics argue the proposed legislation may limit options for customers and affect service quality, suggesting improved supervision, rather than restrictions, could be more beneficial.
The Islamic banking sector accounts for over 23% of total assets in the banking sector, more than 26% in the case of deposits and over 28% in investment as of June.
The central bank will form a central Shariah advisory council to meet the law’s requirements.
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