Shariah -based banks have contributed 23.31% of total deposits in the banking sector in the first quarter of the current fiscal year, according to latest data of Bangladesh Bank (BB).
Total deposits in Islamic banks reached Tk227,814.44 crore at the end of the July-September quarter of this year, up by Tk23,807.38 crore (11.67%) compared to the corresponding quarter of the previous year.
Speaking to the Dhaka Tribune, former finance adviser to the caretaker government, AB Mirza Azizul Islam, said: “Shariah-based banks provide relatively fewer loans than other scheduled banks, resulting in fewer default loans.”
Financial experts say that by terming interest as “profit,” increasing the number of branches in remote areas, and providing friendly service to customers, Islamic banks are gradually gaining people’s confidence.
According to BB, demand deposits of the eight Islamic banks in Bangladesh stood at Tk31,196.44 crore, while time deposits stood at Tk196,618 crore at the end of September this year.
Total deposits of these Islamic banks - which stood at Tk215,309.77 crore at the end of September this year - accounted for 94.51% of the total deposits of the Islamic banking sector.
Among them, Islami Bank Bangladesh accounted for the highest share of deposits (35.31%), followed by First Security Islami Bank (13.56%), Al-Arafah Islami Bank (12.23%), EXIM Bank (11.27%), Social Islami Bank (9.31%), Shahjalal Islami Bank (7.23%), ICB Islamic Bank (0.50%), and Union Bank (5.09%).
Islamic banking branches of commercial banks contributed 2.87%, while Islamic banking windows contributed 2.62% to the deposits.
Nine commercial banks of the country have a total of 19 Islamic banking branches. The nine commercial banks are: The City Bank, AB Bank, Dhaka Bank, Premier Bank, Prime Bank, Southeast Bank, Jamuna Bank, Bank Alfalah, and HSBC Bank.
Seven other commercial banks also have 25 Islamic banking windows. They are Sonali Bank, Agrani Bank, Pubali Bank, Trust Bank, Standard Bank, Bank Asia, and Standard Chartered Bank.
Janata Bank recently obtained permission from BB to start an Islamic Banking window, but has not started operations yet.
Among the different types of deposits of Islamic banking, Mudaraba Term Deposits made the highest contribution (49.59%), followed by Mudaraba Savings Deposits (18.53%), other deposits (14.95%), Mudaraba Special Savings Deposits (8.64%), Al-Wadeeah Current Account Deposits (3.87%), Mudaraba Special Notice Deposits (3.55%), Mudaraba Savings Bonds (0.67%), and Mudaraba Hajj Deposits (0.21%), according to BB.
Deputy Managing Director of Islami Bank Bangladesh, Abu Reza Md Yeahia, said: “We contributed the highest to the total deposits of Islamic banking in Bangladesh”
He added that Islamic banks will spread everywhere because of the high confidence people have in them.
BB officials explained that Islamic finance and banking have become very important in the global financial market, especially in Asia.
They further said that through impact of investment, it can ensure inclusive growth and financial stability, to effectively address other development challenges of the region.
At the end of 2017, the assets of the Islamic financial industry in Asia stood at $528.7 billion, which was 26% of the world’s Shariah compliant financial assets. In Asia, the value of Islamic financial assets has been estimated to exceed $1 trillion by 2023.
At the end of September this year, the eight Islamic banks were operating with 1,156 branches out of a total of 10,159 bank branches in the country.
Deposits, investments, and remittances, of the Islamic banking sector grew by 1.36%, 1.62%, and 7.15%, respectively, from the previous quarter, while excess liquidity went down by 19.54% during the same period.
The Islamic banking sector held almost a one-fourth share of the entire banking industry in terms of deposits and investments at the end of the quarter.
