Recently there have been reports in various media outlets that have alleged a deteriorating condition of Sharia-based banks in Bangladesh.
Titles such as "Worsening state of Sharia-based banks" and "Sharia banks facing more challenges" have become commonplace, raising public questions about the role of Sharia compliance in the banking sector's problems.
Such headlines highlighting "Sharia-based" at the beginning of these reports has led to a growing perception among the public that all irregularities, crises, and mismanagement within the banking sector revolve around the Sharia system.
Many are beginning to wonder if Sharia-based management is incapable of meeting current market challenges.
However, it appears these headlines and reports are part of a deliberate attempt to question and undermine the credibility of the Islamic banking system.
Recently, Bangladesh Bank has finalised a list to merge weak banks with stronger ones, notably excluding any Sharia-based banks, indicating that these banks are not at significant risk.
Islamic banking in Bangladesh began in 1983 and has gained substantial popularity over four decades.
Currently, ten fully-fledged Islamic banks operate alongside conventional commercial banks that have adopted Sharia-compliant banking activities through specialised branches and windows.
Services like Islamic banks, bonds, mutual funds, and insurance have now earned a significant place in the global financial sector, expanding through risk-sharing, inclusion, and real asset-based transactions.
The contribution of Islamic banking to Bangladesh's growth and economic development is noteworthy.
Conventional banks are increasingly finding it attractive and profitable.
Data, awards, achievements, and financial accounts published by Bangladesh Bank and relevant banks highlight the widespread acceptance and trust in Islamic banking among the general populace.
Consequently, many people, out of trust and convenience, voluntarily lean towards Islamic banking.
However, some have taken a stance against the Sharia concept due to fears about an uncertain future.
Globally, the first interest-free institution, “Pilgrims Savings Corporation”, was established in Malaysia in 1962 to collect Hajj funds in instalments. In 1963, the first modern interest-free Islamic bank, Mit Ghamr Savings Bank, was established in Egypt. The Organisation of Islamic Cooperation (OIC) conference in 1974 decided to introduce the Islamic banking system, leading to the establishment of Islamic banks in Bangladesh in 1983.
Today, approximately 100 countries, including nearly 60 non-Muslim majority nations, have Islamic financial institutions.
Even many interest-based international financial institutions are now leaning towards Islamic banking.
Despite the recent reports by some media outlets, the success and contributions of Sharia-based banks to the nation's banking sector are undeniable.
These banks have earned the trust and confidence of people across different walks of life, from the working class and expatriates to simple rural men and women.
They primarily seek Sharia-based banks for their transactions and savings due to the trust and belief that Sharia compliance brings. This success did not require extensive marketing or publicity; hence, a few banks control 30% of the banking sector.
Such success is bound to provoke resentment among some quarters, leading to regular reports questioning the credibility of Sharia-based banks.
Islamic banks, adhering to the principle that interest is forbidden and business is permissible in Islam, attract many customers who prefer not to engage with conventional banks.
Many entrepreneurs also lean towards Islamic banking due to the trust and faith it inspires. Given that almost 90% of the population in Bangladesh is Muslim, the success of Sharia-based banking is expected.
The general perception is that these banks are operated according to Islamic principles and are free from corruption, unlike other banks.
Islamic banks prioritise societal needs and select investment projects based on the integrity of the customer, relevance of the initiative, and adequacy of collateral, ensuring minimal investment risk.
Despite recent media reports about irregular loans and embezzlement, the Islamic banking system has proven successful globally and in Bangladesh.
Any perceived failure is not due to the Islamic banking system or its true followers but rather the conspiracies and greed of Islamophobic and self-serving groups, which affect many sectors in the country.
In contemporary times, Islamic banking is feasible, and existing Islamic banks should prosper with new ones joining the fold.
However, all Islamic banks must uncompromisingly adhere to Sharia compliance.
To ensure this, a robust Sharia council with supervisory authority, not just advisory, comprising qualified and experienced scholars in banking, is essential. They must not validate unjust practices or provide certificates of compliance due to personal involvement.
There should also be facilities for easy Sharia compliance guidance and advice at branches through dedicated desks, cells, or call centres.
Over the past four decades, Islamic banking has seen the fastest growth in the country, controlling nearly 30% of the banking sector.
Despite its popularity and growth, Islamic banking operates without specific legislation, relying only on a directive issued by Bangladesh Bank in 2009.
The need to expand and make this directive more effective is crucial. Ignoring the lack of legislation and the necessity for it while questioning Sharia is undoubtedly intentional and regrettable, causing the otherwise benevolent Islamic banking system to face public scrutiny.
Certain media factions continue to fuel this negative sentiment.
The controversy surrounding Sharia-based banks is unfortunate. The overall picture of the banking sector is similar, yet only Islamic banks are singled out.
Given the current debate, it is time to review the savings, non-performing loans, and loan distribution of Islamic banks.
For four decades, there was no debate about Islamic banks, which always had a surplus in deposits.
Other banks would borrow deposits from Islamic banks when needed. The current scenario, showing the opposite trend, is undesirable.
It is crucial for the relevant authorities to address this issue sincerely, as it concerns not just business and profit but also upholding Islamic values.
