Islamic finance has witnessed sustained global growth over the past few decades, and Bangladesh has emerged as an active market in this space, with Islamic banking now deeply embedded in the country’s financial system and enjoying broad public acceptance.
As the market matures, attention is shifting beyond traditional banking products towards capital-market-based Shariah-compliant investment solutions, reflecting a broader change in investor behaviour where financial returns remain important but are no longer the sole criterion.
Ethical alignment, transparency, regulatory discipline, governance standards and sustainability have become central to investment decision-making.
Within this context, Shariah-compliant mutual funds are gaining prominence as a bridge between faith-based principles and modern capital markets. Bangladeshi investors seeking Shariah-aligned opportunities can choose from Islamic bank deposits, Mudaraba savings schemes, Bangladesh Government Investment Sukuk, corporate Sukuk and Mudaraba bonds, Shariah-compliant listed equities, initial public offerings, qualified investor offerings and mutual funds that adhere to Islamic principles.
Among these instruments, mutual funds play a particularly strategic role because they combine diversification, professional management, liquidity and regulatory oversight, features that are difficult for most individual investors to replicate independently.
By pooling funds and deploying them through structured portfolios, these funds allow broad participation in capital markets in a disciplined and transparent manner. This is especially relevant in Bangladesh, where many retail investors lack the time or expertise to manage diversified portfolios.
When aligned with Shariah principles, mutual funds offer additional comfort to those seeking wealth growth without compromising ethical or religious values. Notably, their core characteristics — risk sharing, asset-backed investment and transparency — are consistent with the foundations of Islamic finance.
With around 90 per cent of Bangladesh’s population following Islamic principles, Shariah-compliant mutual funds provide a practical mechanism for faith-based participation in the capital market. Over the past decade, this segment has recorded steady progress, signalling rising awareness and investor confidence despite remaining smaller than conventional funds.
Bangladesh currently has 139 registered mutual funds with a total asset base of about Tk9,320 crore. Of these, 20 Shariah-compliant funds, comprising open-end and closed-end structures, hold combined assets of around Tk985 crore and are being managed by 17 asset management companies. Although modest in scale, the segment holds significant long-term potential as institutional and long-horizon investors become more engaged.
Shariah mutual funds were first introduced in Bangladesh in 2010, marking a milestone in Islamic capital market development. Since then, stronger regulatory oversight, improved disclosure standards and Shariah governance frameworks have enhanced credibility, and over the medium to long term these funds have demonstrated competitive risk-adjusted performance. Because they follow Shariah screening and investment discipline, returns may occasionally trail conventional funds during strong rallies, yet they generally outperform most other Shariah-compliant instruments such as deposits or savings schemes over longer horizons.
Their relative resilience stems from a preference for companies with lower leverage, stronger balance sheets and sustainable cash flows, characteristics that cushion portfolios during periods of market stress and volatility. Recent developments in the Islamic banking sector, including consolidation initiatives, further highlight the need for diversified Shariah-compliant investment avenues beyond deposits, and mutual funds address this need by offering regulated, transparent and professionally managed exposure to capital markets.
These funds suit individuals seeking ethical options, institutions with long-term allocation objectives and investors prioritising sustainable growth over short-term movements, with a medium- to long-term horizon remaining crucial to realising their benefits.
Against this backdrop, Sandhani Asset Management Limited is preparing to launch the Sandhani AML SLFL Shariah Fund, an open-end Shariah-compliant mutual fund with an initial size of Tk25 crore. The fund aims to generate stable long-term returns through adherence to Shariah principles and disciplined portfolio management.
Commercial Bank of Ceylon PLC will act as custodian, while Bangladesh General Insurance Company PLC will serve as trustee, ensuring governance, transparency and investor protection. The public subscription period will run from 1 February to 12 April, with units available through Sandhani AML and designated sales agents nationwide.
As Bangladesh’s capital market evolves, investment discussions can no longer focus solely on returns, as ethics, governance, transparency and sustainability are now integral to assessing financial products.
In this environment, Shariah-compliant mutual funds represent more than an alternative, offering a principled, regulated and forward-looking pathway that connects faith with finance, individual savings with national economic growth, deepens financial inclusion and mobilises long-term capital.
While all market-linked investments carry risk, these funds provide a structured and value-aligned option for responsible participation in Bangladesh’s capital market and are poised to become an increasingly important pillar of the country’s sustainable financial future.
The writer is the Managing Director and CEO of Sandhani Asset Management Limited.
