Islamic banking shines

Deposits of the Islamic banking industry grew by 21 percent in the year to June 2008, higher than 15 percent growth of the conventional banking sector in the same period, central bank data show.

Total deposits of the Islamic banks and Islamic banking branches of the conventional banks stood at Tk 34,730 crore at the end of June 2008 against Tk 28,650 crore in June 2007, meaning Tk 6,080 crore was deposited in Islamic banks in one year alone.

Out of 48 banks in Bangladesh, six private commercial banks are operating as full-fledged Islamic banks and 21 branches of 10 conventional banks are involved in Islamic banking business.

Islamic banking industry's deposit worth Tk 34,730 crore was 24.4 percent of the total deposits of all private commercial banks and 16.1 percent of the total banking system's at the end of June 2008.

As of June 2007, deposits of Islamic banking sector were 23.6 percent of the total deposits of all private commercial banks and 14.3 percent of the total banking system's.

Total investment of the Islamic banks and the Islamic banking branches of the conventional banks stood at Tk 34,910 crore at the end of June 2008, up from Tk 26,540 crore in June 2007.

The investment was 26.8 percent of all private banks' and 19.3 percent of the total banking system's.

Popularity of Islamic banking is rising worldwide, especially among the Muslims, for its interest-free nature. Many western banks, including those in the US and Europe, have already adopted the idea of Islamic banking to net Muslim customers. Bangladesh first launched such banking system in 1983.

According to Qatar Islamic Bank (QIB), this banking system is set to become a $4 trillion global business within the next five years.

Quoting the international rating agency, Standard & Poor's, QIB said in its newsletter that 'sukuk' or Islamic bond is one of the fastest growing segments of Islamic banking along with mutual funds.

Islamic finance experts say global sukuk market is now worth around $82 billion.

The International Monetary Fund estimates the market to reach $150 billion within the next three years. The ever-increasing demand for financing infrastructure development and other mega projects in the private sector will continue to be the major demand driver for sukuk, they say.