Islamic banks winning hearts of remitters

Foreign remittance inflow through the country's Islamic banks last year clocked 46% year-on-year growth even amid the pandemic, said the central bank in a report Monday.

According to the Bangladesh Bank's "Developments of Islamic Banking in Bangladesh-October-December 2020" report, expatriates are more interested in sending remittances through Islamic banks than the conventional ones.  

In 2019, the Islamic banks posted 12% year-on-year growth in raking in remittances.

In 2020, the Islamic banks brought in 40% of the total remittance. For the banks, the figure was 35% in previous 2019.   

At the end of December last year, the highest growth in remittance collection was in the Islamic banking branch of the conventional banks. At the end of December 2020, remittances through this channel increased by about 500% compared to the previous year and reached Tk284 crore.

On the other hand, remittances worth around Tk36 crore came through the Islamic windows of the conventional banks at the end of December 2020, which is 80% more than the previous year.

At the end of December last year, the number of Islamic banking branches of nine private conventional banks stood at 19. Besides, 14 public and private banks have 198 Islamic banking windows.

While contacted, the Bangladesh Institute of Bank Management (BIBM) Associate Professor Md Alamgir told The Business Standard that last year's remittances were higher than the previous year, which had a positive effect on the economy.

"In addition, the Islamic banking branches and windows of conventional banks have been growing for the last two years. These banks are trying to attract customers in various ways. Many banks are also offering 3% incentive for remittance instead of 2%."

Alamgir further said, "The pandemic also inspired many expatriates to remit through Islamic banks owing to religious perspectives."

Deposit with the country's Islamic banks increased by 16% and touched the Tk3.27 lakh crore milestone last year.

However, the deposit growth rate was 18% at the end of 2019 – which means the Islamic banks witnessed 2% fall in deposit growth last year.

In the meantime, total loan disbursement of Islamic banks increased by 8% to more than Tk2.94 lakh crore at the end of December 2020. In 2019, the banks saw a similar growth in loan disbursement.

Last year, 47% of the deposits were term deposits. On the other hand, about 44% of loans were disbursed in the country's business sector. Besides, more than 23% of the loans were distributed as working capital of the industry.

In the meanwhile, Islamic banks are in a good position in distributing farm loans as per the target. Last year, 107% of farm loans against the target was disbursed, which was 71% in 2019.

The central bank report said like the conventional banks, Islamic banks have played a crucial role in counteracting the virus fallout.

Apart from virus stimulus disbursement, they are providing the customers with online banking facilities and the banks have performed well in ensuring health safety of the employees.

At the end of last year, the workforce in the Islamic banking branches and Islamic banking windows increased by about 3,000 to 38,784. Noting that Islamic banking and Shariah-based banking services are becoming popular in Bangladesh, the report said a quarter of the banking services are in the hands of the Islamic banks.