NRBC working as a driving force for inclusive, ethical and sustainable finance in Bangladesh

As Bangladesh's financial landscape continues to evolve, Islamic banking is increasingly positioning itself as a catalyst for financial inclusion, ethical finance, and sustainable growth.

In this perspective, I share my reflections on the sector's future, depositor confidence, capital market development, and opportunities for Non-Resident Bangladeshis (NRBs).

Prospects of Islamic banking in Bangladesh

Islamic banking in Bangladesh has witnessed significant growth over the past two decades, and its outlook remains strong. Today, it accounts for nearly one-fifth of total banking deposits and investments, which demonstrates a sustained and growing demand for Shari'ah-compliant financial services.

Several structural factors underpin this growth. Bangladesh's large Muslim population naturally gravitates towards Islamic finance, while the sector itself plays an important role in expanding financial access—particularly in rural areas and among small and medium enterprises (SMEs). As the economy continues to grow, new opportunities are emerging in SMEs, infrastructure, halal industries, and trade finance.

The development of Islamic capital market instruments—particularly Sukuk—also presents significant opportunities for liquidity management and investment diversification. However, to fully realize this potential, the sector must address gaps in governance and Shari'ah oversight. With the right reforms, Bangladesh can emerge as a leading Islamic finance hub in South Asia.

Rising popularity of Islamic banking

The growing preference for Islamic banking can be attributed to its alignment with religious principles, particularly its avoidance of interest (riba) and emphasis on profit-and-loss sharing.

Beyond religious considerations, Islamic banking promotes an ethical framework that links financial activity to real economic transactions. Products such as Murabaha, Ijarah, and Musharakah encourage transparency and financial discipline, which enhances resilience within the system.

In Bangladesh, this appeal is further strengthened by strong demand for Shari'ah-compliant services, combined with focused offerings in SME financing, agriculture, remittance services, and agent banking. These factors have collectively contributed to wider financial inclusion.

Islamic banking performance at NRBC Bank

At NRBC Bank PLC, we have been steadily strengthening our Islamic banking operations through our Al-Amin Islamic Banking window. Our focus remains on ensuring strict Shari'ah compliance while building customer trust and driving innovation.

We have expanded our Islamic product offerings and enhanced our SME and retail financing portfolio. At the same time, we are leveraging digital channels to reach a broader client base, including NRBs, while maintaining a strong framework of Shari'ah governance. These efforts are aligned with our broader goal of ensuring sustainable and responsible growth.

Several structural factors underpin this growth. Bangladesh's large Muslim population naturally gravitates towards Islamic finance, while the sector itself plays an important role in expanding financial access—particularly in rural areas and among small and medium enterprises (SMEs).

Rebuilding depositor confidence

Restoring and strengthening depositor confidence in Islamic banking requires a comprehensive approach. First and foremost, Shari'ah governance must be robust, with independent oversight and regular audits to ensure compliance.

Transparency is equally critical. Clear, timely, and accessible disclosures help build trust. Regulatory supervision by Bangladesh Bank must remain strong and effective, while corporate governance and accountability within banks need to be continuously improved.

In addition, enhancing deposit protection mechanisms, strengthening risk management practices, and maintaining high asset quality are essential. Promoting financial literacy among the public and leveraging technology to improve service delivery will further reinforce confidence in the system.

Opportunities in the Islamic bond market

The Sukuk market presents a significant opportunity for Bangladesh to diversify its funding sources and mobilize large-scale investments, both domestically and internationally.

Sukuk instruments are particularly well-suited for financing infrastructure and major development projects. They also have the potential to deepen the Islamic capital market and support private sector growth. For this to happen, strong regulatory support from both Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC) is essential.

Sovereign participation—particularly through sovereign Sukuk issuance—can play a catalytic role in developing this market and establishing investor confidence.

Regulatory support for product diversification

To foster innovation and diversify Islamic banking products, a comprehensive regulatory framework is required. This should include clear guidelines for Islamic financial contracts and the establishment of a dedicated regulatory architecture for Islamic banking.

It is also important to ensure legal and tax neutrality for Islamic financial instruments, so that they can compete fairly with conventional products. Regulatory sandboxes can encourage innovation, while a centralized Shari'ah advisory framework can ensure consistency and credibility across the sector.

Capacity building and industry collaboration will further strengthen the ecosystem and support sustainable product development.

Attracting non-resident Bangladeshis (NRBs)

Islamic banking has strong potential to attract NRBs through a range of Shari'ah-compliant products and services. These include remittance-linked accounts, savings and investment products, and project or real-estate-linked investment opportunities.

Other offerings such as Hajj and Umrah savings schemes and profit-sharing deposit accounts can also appeal to NRBs. In addition, seamless digital banking platforms that facilitate cross-border transactions are essential.

The ethical and risk-sharing principles of Islamic finance resonate strongly with many NRBs, encouraging them to invest in Bangladesh while remaining aligned with their values.

Promoting sustainable and inclusive growth

Islamic banking is inherently aligned with sustainable and inclusive development. By focusing on financing real economic activities—such as SMEs, agriculture, and infrastructure—it supports productive sectors of the economy and promotes job creation.

It also plays a role in expanding financial access to underserved communities. Instruments such as Zakat-based financing and Islamic microfinance contribute to poverty alleviation and social development.

With strong Shari'ah governance, transparency, and corporate responsibility, Islamic finance can help build a more resilient and equitable financial system—one that supports both economic growth and social well-being in Bangladesh.

Author: Dr Md Touhidul Alam Khan, CEO & Managing Director, NRBC Bank PLC