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Leveraging Islamic Finance to Develop a Sustainable Capital Market

Sector faces greater asset risks with weaker loss buffers than conventional peers

The latest Financial Stability Review published by the Bangladesh Bank in August 2021 shows that Islamic banks' asset quality improved in 2021 despite the coronavirus pandemic, as that of conventional banks did. However, asset risks are greater for Islamic banks than for conventional banks because the former has increased exposures to corporates rapidly in recent years. Islamic banks are also more vulnerable to a deterioration of asset quality because they have weaker loss buffers.

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