Photo : Messenger
The global economic stage is intricately woven with the threads of Islamic principles, and prominent players such as Indonesia, Saudi Arabia, Turkey, Iran, and Bangladesh influence the narrative. While these nations share a common Islamic foundation, the manifestation and impact of Islamic banking within their financial sectors exhibit significant variations.
Indonesia's quandary:
Indonesia, home to the world's largest Muslim population, surprisingly witnesses a modest share of less than 8% for Islamic banking in its national banking sector. This incongruity is particularly notable, given its overall Islamic banking and finance market share exceeding 10%, raising concerns about the alignment of its financial sector with its status as the largest Islamic economy.
Turkey's parallel story:
Turkey mirrors Indonesia's situation, facing a similar narrative where the share of Islamic banking remains subdued within the national financial framework. This parallel story prompts a closer examination of the factors influencing the growth of Islamic finance in these significant Muslim-majority nations.
Saudi Arabia and Iran: Pillars of Islamic Finance:
In stark contrast, Saudi Arabia and Iran emerge as pillars of Islamic banking and finance. Saudi Arabia boldly proclaims a fully-fledged Islamic economic system, showcasing substantial integration of Islamic principles into its financial infrastructure. Similarly, Iran demonstrates a significant presence in Islamic finance, reflecting a commitment to fostering an economy aligned with Islamic values.
Bangladesh's distinctive trajectory:
In the ever-evolving global finance landscape, Bangladesh stands out as a celestial star, illuminating the international stage with its remarkable ascent in Islamic finance. Unlike its counterparts, Bangladesh has carved a distinctive path marked by a stellar rise that has captured the attention of financial experts and industry observers. This trajectory is underlined by the fact that Islamic banking in Bangladesh now constitutes nearly one-third of the national financial sector, reflecting a robust and growing commitment to Islamic finance principles.
The genesis of Bangladesh's triumph:
At the core of Bangladesh's success story lies a combination of strategic initiatives, regulatory reforms, and a burgeoning demand for Islamic financial products. The government's commitment to creating an enabling environment for Islamic banking, coupled with the proactive stance of financial institutions, has fueled the rapid growth of this sector. Bangladesh Bank, the central bank, has played a pivotal role in implementing policies that facilitate the expansion of Islamic finance, fostering a conducive ecosystem for both investors and consumers.
Islamic finance landscape in Bangladesh:
The Islamic finance landscape in Bangladesh spans a diverse array of products and services, including Islamic banking, Takaful (Islamic insurance), and Islamic capital markets. The availability and variety of Sharia-compliant financial instruments have not only attracted domestic investors but have also positioned Bangladesh as an attractive destination for international Islamic finance investments.
Investor confidence and market dynamics:
The surge in Islamic banking's market share reflects a growing confidence among investors in Bangladesh's ability to provide stable and ethical financial solutions. Sharia-compliant financing has gained traction not only among the Muslim population but also among a broader spectrum of investors seeking ethical and sustainable investment options. This shift in market dynamics underscores the universal appeal of Islamic finance principles and their adaptability to diverse financial landscapes.
Global recognition and projections:
Bangladesh's meteoric rise in the global Islamic finance constellation has not gone unnoticed on the international stage. Industry experts and financial institutions around the world are recognizing the nation's potential to become one of the top three significant Islamic financial markets by 2035. This recognition positions Bangladesh as a beacon of success and a model for other nations aspiring to integrate Islamic finance into their economic frameworks.
Challenges and prospects:
While Bangladesh's success in Islamic finance is evident, challenges persist. Ensuring sustained growth requires addressing issues such as financial literacy, regulatory frameworks, and the development of a robust Islamic capital market. The government, financial institutions, and regulatory bodies are collaboratively working to overcome these challenges, paving the way for a future where Bangladesh continues to shine brightly in the global Islamic finance galaxy.
Conclusion:
Bangladesh's meteoric ascent in the tapestry of global Islamic finance is a testament to the nation's commitment to ethical and sustainable financial practices. As the country navigates the celestial realms of finance, it solidifies its position as a key player in the global Islamic finance landscape and serves as an inspirational model for others seeking to harness the potential of Islamic finance in shaping a brighter financial future. Bangladesh's celestial progress in the realm of Islamic finance is not just a national triumph; it is a beacon of hope for a more inclusive, ethical, and prosperous global financial ecosystem.
The writer is the additional managing director and chief credit officer of The Premier Bank PLC. He is a fellow member of the Institute of Cost and Management Accountants of Bangladesh (ICMAB) and the first Certified Sustainability Reporting Assurer (CSRA) in Bangladesh. He is also a post-graduate diploma from the Institute of Islamic Banking and Insurance (IIBI), United Kingdom.
Messenger/Sajib
