Although Islamic banks in Bangladesh expanded their deposit and investment portfolios in August, declining public confidence in Shariah compliant lenders allowed conventional banks to gain more ground in the market.
Total deposits at Shariah banks grew 7 percent year-on-year to about Tk 4.62 lakh crore in August. However, their share of the deposits that month were 0.82 percentage points lower at 22.54 percent.
Officials of Bangladesh Bank said the depositors of several Islamic banks withdrew their funds after chronic mismanagement in the sector came to light after the mass uprising in July 2024.
“People moved their money from a few distressed Islamic banks to conventional banks for safety,” Bangladesh Bank spokesperson Arief Hossain Khan told TIMES of Bangladesh.
And although investments – the Shariah compliant alternative to loans – increased 10.55 percent year-on-year to Tk 5.72 lakh crore in August, Islamic banks’ share of the segment slipped by 0.18 percentage points to 24.77 percent.
Likewise, the total assets of Islamic banks rose by about 12.13 percent year-on-year to Tk 9.43 lakh crore in August. On the other hand, conventional banks posted 16.42 percent asset growth.
As such, Islamic banks’ share of the total assets in the banking industry edged down by 0.63 percent to 20.78 percent.
The situation was similar in terms of export earnings handled by Islamic banks, which increased by about 12.32 percent year-on-year to $775 million in August.
Here, Islamic banks maintained their existing share, handling around one-fifth of all the export earnings.
However, import payments through Shariah-compliant lenders fell sharply to $893 million in August, down 19.34 percent year-on-year, largely due to US dollar shortages and tougher approvals for letters of credit.
Remittances channelled through Islamic banks stood at $610 million the same month, up 14.38 percent from a year earlier. As a result, their share of total remittances rose slightly by 1.21 percentage points to 25.19 percent.
The only segment where Islamic banks strengthened their hold was agent banking. Deposits collected through agent banking outlets operated by Islamic banks increased 27 percent to Tk 26,010 crore in August.
As such, Islamic banks claimed 55.36 percent of all deposits made through agent banking that month while their share was 53.67 percent the year prior.
