Perception of bankers and customers towards deposit and investment mechanisms of Islamic and conventional banking :

Abstract EN

Islāmic banking is growing at double digit rate annually.

Bangladesh is the third largest Islāmic country in the world in terms of Muslim population.

The Islāmic finance industry is growing in Bangladesh as well as its challenges and critiques.

It is interesting research question to explore the demand for Islāmic banking in the presence of a strong conventional banking culture in a developing country like Bangladesh.

This study is primarily concerned with the theory of Islāmic banking and its practice in Bangladesh.

It examines: (a) the Sharī‘ah principles for operation of Islāmic banking in Bangladesh, (b) the genesis of Islāmic banking in Bangladesh, (c) the factors which have led to the emergence of Islāmic banking as well as the growth, development and future of Islāmic banking in Bangladesh, and (d) the deposit and investment mechanisms of Islāmic and conventional banking in Bangladesh.

The results show that both the bankers and bank customers have confusing notions about Islāmic banking practices, partly due to lack of proper knowledge about the fundamentals of Islāmic finance and also due to Islāmic banks’ over-reliance on short-term trade financing.

The findings also indicate that although Islāmic banks in Bangladesh are competing successfully with their conventional counterparts in an environment where no independent guidelines or Act exist for them, the products and services they provide often seem to resemble with those provided by conventional banking.

We suggest that regulatory authorities of Bangladesh should provide a well-defined and explicit legal and regulatory framework that, being consistent with Islāmic Sharī‘ah, should be realistic and flexible enough to meet internationally recognized prudential and supervisory requirements.