Prof Dr M Kabir Hassan of the University of New Orleans; Dr Scott Levy, CEO of Bedford Row Capital; Andrew Tebbutt, the managing director of REDmoney Group; respected moderator Md Touhidul Alam Khan; distinguished panelists, my dear fellow colleagues; sponsors; and all participants.
Assalamualaikum, and good morning/good afternoon/good evening to all of you.
It is a great pleasure for me to attend this online session on the development of Islamic banking and finance in Bangladesh organized by REDmoney Group as a speaker.
I am pleased to see that the development of the Islamic financial industry is taking place in many areas including the development of ideas and knowledge, products and services and also financial sectors. This session could pave the way for the industry’s ability to move toward better insights in servicing the market in Bangladesh.
Supported by internationally qualified experts, it is not overdone if I expect at the end of the session that this conference will produce strategic initiatives and measures to give Islamic finance a greater and significant role in the economic development of the country.
Distinguished guests, ladies and gentlemen,
Before sharing my insights on the topic today, I would like to draw your kind attention to the few key facts of this country. Bangladesh is the second-largest Muslim-majority nation and has the ninth-largest population in the world. Since 2005/06, it has been keeping its growth rate around 7%. Though the unemployment and poverty rates are still high and it is poorly ranked in the Global Innovation Index, Bangladesh is a nation of high potential due to its demographics with more than 60% consisting of the younger generations who can bring changes in the economy.
Ladies and gentlemen,
If we look at the organic development of Islamic banking in Bangladesh, this sector has achieved robust growth mostly due to the huge public demand, continuous success of Islamic banking and policy support from Bangladesh Bank. The first Islamic bank in Bangladesh, Islami Bank Bangladesh, started its journey in 1983 10 years after the first Islamic bank in the world, Dubai Islamic Bank.
As of December 2020, Bangladesh’s 10 fully-fledged Islamic banks have been operating with 1,524 branches out of a total of 10,752 branches in the whole banking sector. In addition, 21 Islamic banking branches of nine conventional commercial banks and 163 Islamic banking windows of 11 conventional commercial banks are also providing Islamic financial services in Bangladesh.
Ladies and gentlemen,
Is that development sufficient? We are very lucky to be a Muslim-majority country with what we have achieved so far but on the other hand, we are very unfortunate not to understand Islamic finance, how it works in the area of development and how it improves in the area of innovation. The definition of Islamic banking is that it is Shariah-based banking and Islamic finance continues to grow globally due to its risk-sharing, resilience, inclusive and real asset-backed transaction features. But if we see the global trends of interest rates since the global financial crisis in 2007/08, I would rather say that Islamic finance empowers creativity, innovation and growth.
Ladies and gentlemen,
The COVID-19 pandemic has really changed the global economic perspectives, in addition to all the advances in monetary and macroprudential policies to strengthen financial stability and growth. Almost all countries have suffered from this ongoing pandemic and the projected global growth rate has been reduced and Bangladesh is no exception. To boost economic activities and achieve sustainable growth, the Bangladeshi government and Bangladesh Bank have jointly taken many measures that are under implementation.
Some of the historic steps are shared here:
- A financial stimulus package including a refinance scheme
- A credit guarantee scheme for cottage, micro, small and medium enterprises
- The issuance of Sukuk for the first time in Bangladesh, and
- The introduction of a start-up fund and directives to build banks’ own funds.
Distinguished guests, ladies and gentlemen,
If we observe the relationship between productivity and the interest rate mechanism and global trends since 2007/8, countries have been taking so many steps to lower interest rates and are trying to boost the economy. Bangladesh Bank has also reduced the policy rate from 5% to 4% recently and is encouraging commercial banks to offer loans at a reduced interest rate.
At the end of the October–December 2020 period, deposits and investment grew by 2.28% and 3.55% respectively while remittances and excess liquidity of the Islamic banking sector increased by 19.24% and 60% respectively compared with that of the last quarter. Islamic banks accounted for a 40.51% share of remittances mobilized by the entire banking sector during the same period.
It would be worth sharing that the most challenging parts not only in this sector but also in the overall banking system are the lack of skilled human resources, product diversification, the use of technology and a strong legal framework for Islamic banking in Bangladesh.
Please allow me to close my speech by expressing my appreciation and sincere gratitude to the organizer, speakers and participants for the willingness to join this event. I also would like to wish you all a fruitful discussion and deliberation in this important event.
Thank you very much, Assalamualaikum.
Md Nazrul Islam — Deputy General Manager, Bangladesh Bank