CASE STUDY ON DEPOSIT

MOBILIZATION BY ISLAMIC
BANKS IN BANGLADESH

Submitted By
Group-5
1. Sadat Bin Saif, FVP, Credit Risk Management Division
2. Md. Shahidul Huq, VP, Gulshan Branch
3.Md. Serajul Mamun, FAVP, Corporate Banking Division
4. Md. Arifur Rahman, Executive Officer, SME Banking Division
5. Shakil Uddin, Probationary Officer, Bijoynagar Branch.
 Abstract
Banking means deposit mobilization and deployment of those deposits into advances or investments in
different sectors. The element of interest has been for long used as main instruments for deposit
mobilization and the deployment of funds therefore. In the Muslim world, it remains a deep cry in
peoples` hearts to fashion and design their economic lives in accordance with the precepts of Islam. It is
committed to conduct all banking and investment activities on the basis of interest free unveiled a new
horizon and ushered in a new silver lining of hope towards materializing a long cherished dream of the
people of Bangladesh for doing their Banking transitions in line with what is prescribed by Islam.
Islamic banking, a new genre of the Shari’ah-based banking system, has been able to prove its
proficiency and augur its potentials in recent years despite the global recession and diverse challenges
confronted by various banks in Bangladesh pursuing the conventional banking system. That is why, an
attempt has been made in this paper to study the deposit mobilization by Islamic Banks in Bangladesh.
We have rendered our knowledge to present this study on all Performance of Islamic Banks in
Bangladesh. In this study, it is shown that various operational activities can be used in the evaluation of
deposit mobilization of Islamic Banks.

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 Contents
1. Introduction..............................................................................................................................................4
2. Literature Review....................................................................................................................................4
2.1 Islamic Banking Products/Services....................................................................................................4
2.1.1 Deposit Mobilization.......................................................................................................................4
2.1.2 Financing facilities..........................................................................................................................5
3.Brief overview on Islamic Banking in Bangladesh..................................................................................6
Table 3.1: Number of Islamic Banks, Branches and Windows............................................................6
4. Activities of Islamic Banking in Bangladesh: January-March 2023.......................................................7
Table 4.1 Basic information on Islamic Banking: January-March 2023.............................................8
4.1 The Market Share of Islamic Banks...................................................................................................9
Table 4.2 Performances of Islamic Banks Compared to All Banks in Bangladesh.............................9
5. Mobilization of Deposits by Islamic Banking.......................................................................................10
5.1 Types of Deposits.............................................................................................................................11
6. Investments of Islamic Banking............................................................................................................12
6.1 Sector-wise Investment....................................................................................................................12
6.2 Mode Wise Investments...................................................................................................................13
6.3 Investment in the Agricultural Sector..............................................................................................14
Table 6.1: Summary of Investment in Agricultural Sector................................................................14
7.Foreign Exchange Dealings and Remittance Mobilizations by Islamic Banking..................................14
7.1 Exports.............................................................................................................................................14
7.2 Imports.............................................................................................................................................15
7.3 Remittance Mobilizations................................................................................................................16
8. Conclusion and Recommendation.........................................................................................................16

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 List of Charts

Chart 1:Islamic Banking Activities Compared to All Banks in Bangladesh(January-March 2023).........10

Chart 2:Share of Deposits of allI slamic Banks (January-March 2023)....................................................11

Chart 3:Types of Deposits, January-March 2023......................................................................................11

Chart 4: Share of Investments Made by IslamicBanks(January-March 2023)..........................................12

Chart 5: Sector-wise Investment ( January-March 2023)..........................................................................13

Chart 6: Mode-wise Investment of Islamic Banks (January- March 2023)...............................................13

Chart 7: Exports By Islamic Banking System (January-March 2023)......................................................15

Chart 8: Imports By Islamic Banking System (January-March 2023)......................................................15

Chart 9: Share of Remittances mobilized by Islamic Banks (January-March 2023)…………………….16

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1. Introduction
Banks are a subset of the financial services industry that offers banking and other financial
services for its customers along with reporting the transactions of their accounts and portfolios
throughout the day. Bank is one of the profitable banking financial institutions that give financial
services by accepting deposits from the depositors and providing loans to the borrowers. Deposits may
be considered as the most important resource of commercial banks because deposits meet up the needs
of financial resources of banking systems. Therefore, the amount of deposit of commercial banks should
be mobilized and accumulated enough so that it can satisfy the financial needs of its customers. Deposit
mobilization means encouraging customers to deposit cash with the bank or inducing new clients to
come and open accounts with the bank. Mobilization of deposits plays an important role in improving
economic efficiency through the channelling of funds from resource surplus unit to those with better
opportunities for productive investment. But deposit mobilization is not an easy task. In this case,
various exogenous factors i.e. People's confidence in the banking system, People’s banking habit, the
volume of business transaction, the general economic environment and the saving potential of the region
as well as endogenous factors i.e. location, type of building and window dressing 4 to the banking
system have to be considered. However, the main objective of the present study is to show the impact of
Islamic Banks in country’s economic growth and deposit mobilization.

2. Literature Review
In order to find out the research gap in the proposed field of the study and formulate a plan for
conducting the present study, a number of related literatures have been reviewed.

2.1 Islamic Banking Products/Services

A Brief Theoretical Review Islamic banking offers products/services which are very similar to
those offered by conventional banks. However, the approaches of Islamic banks are distinctly different
from the ones of conventional banks. Hence, a brief overview of the Islamic banking products and
services in Bangladesh are presented here. For ease of explanation, the products and services are
discussed under two broad categories: deposit mobilization (sources of funds), and financing facilities
(uses of funds).

2.1.1 Deposit Mobilization

Deposit mobilization is one of the most important parts of banking activities which play a vital
role in developing all spares of an economy. Deposit mobilization is the process of mobilizing funds
from the surplus units to the deficit units which helps in improving economic efficiency by making
better opportunities for productive investment. Therefore, the mobilization of bank deposit should be
managed properly. But, it is not an easy task. The success of the mobilization of deposit depends on the
financial system’s development and the bank’s strategic practices. Deposit mobilization in Islamic banks
is done through current account, savings account, and savings deposits.
Current account: Islamic banks accept deposits from customers on current accounts as
conventional banks do. However, Islamic banks operate current accounts under Al Wadia principle.
According to the principle, banks receive the deposits with the promise to repay them on demand by the
customers. Banks use such funds with the permission of the customers and at the sole risk of the banks,

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and hence, the depositors of this type of account are not entitled to any share in the profit earned by the
bank.
Savings account: Islamic banks accept saving deposits from customers under AlWadia and Al-
Mudaraba Shariah principles. In saving accounts under the Al-Wadia principle, the bank is given an
authorization by depositors to use the fund at the bank’s own risk. Al-Wadia savings deposit is almost
similar to a ‘current Account’ or ‘demand Deposit’ except that the bank guarantees its customer the full
return of the deposited fund with any voluntary profit. Murabaha savings deposits give the banks
exclusive rights to manage the deposits. The profit or loss from the use of such deposit is shared
between the banks and the depositors at a pre agreed-upon ratio.
Term deposits: Islamic banks also source funds through term deposits just like the conventional
banks do. However, Islamic bank apply Al-Mudaraba principle
Savings bond: This is another type of savings scheme offered by Islamic banks to the savers.
Islamic banks follow Al-Mudaraba principle in offering this product.

2.1.2 Financing facilities

The commercial financing instruments provided by Islamic banks are based on the Islamic
Shariah. The instruments along with the mode of Islamic Shariah are described below:
Musharaka: The word Musharaka stands for a partnership that shares both profit and loss. Such
joint venture way of financing is designed to limited production or commercial activities of long
duration. Under Musharaka, the bank and the customer jointly contribute capital as well managerial
expertise and other essential services at agreed proportions. Profit or losses are shared according to the
contract agreed upon.
Mudaraba: Mudaraba refers to a contract between at least two parties in which the bank as the
investor supplies the entire capital of the business. Hence, a relationship is formed in which banks act as
the supplier of capital. The entrepreneur acts as the manager of capital only. When the venture ends, the
manager of capital i.e. the entrepreneur pays the entire capital back to the bank, along with an agreed
proportion of profit. If there is any loss, it is borne by the bank.
Bai-Murabaha: The word ‘Murabaha’ means a cost-plus profit/mark-up contract. In this system
of financing the bank agrees to purchase for a client. The client will then repay the bank within a stated
time period at an agreed upon profit margin. The mark up price that the bank and the buyer agree to is
mainly based on the market price of the commodity. Thus, under Bai-Murabaha mode of financing, the
bank earns a profit without bearing any risk.
Bai-Salam: Bai-Salam means a sale in which an advance payment is made for a later delivery.
Usually the seller is an individual or business and the buyer is the bank. BaiSalam benefits both the
banks and seller. The banks locks in the price at which the commodities will be purchased and upon
delivery can profit for selling the commodities. On the other hand, by receiving advance payments for
commodities, the seller can use the money for meeting various financing needs, particularly any working
capital requirements.

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 Bai-Muajjal: Bai-Muajjal refers to a contract resembling credit sale. Under this type of contract,
the seller sells certain specific goods to the buyer at an agreed fixed price payable at a certain fixed
future date in lump sum or in fixed installments. The sold goods must be allowed under both Shariah
and the law of the country. Under this type of financing, Islamic banks buy goods for those who need
them and then, receive a fixed payment for the goods at a later date.
Ijarah: Ijara refers to leasing in Islamic finance. Leasing by Islamic banks is very similar to the
leasing of conventional banks. It is argued that: “The leasing agreement is based on profit sharing in
which the bank buys the movable or immovable property and leases it to one of its client for an agreed
sum by installments and for a limited period of time into a saving account held with the same bank.
These installments are invested in Mudaraba investment for the customer’s account. The accumulated
profit generated from the payments, and the payments themselves are invested in the bank’s investment
ventures over the time period of lease, contributing to eventual purchase of the leased assets.” The
difference of Islamic banking lease with the traditional lease is that under Islamic banking leasing the
risk related to leasing is shared between the lessee and lessor. There are various modes of leasing under
Islamic banking, discussion of which does not fall under the specific purview of this report.
Hire Purchase under Shirkatul Meelk: Under this mode of financing, Islamic banks share
equity with the client in purchasing some assets. Both the bank and the client share the ownership and
the share of benefit and loss in operating the asset. The portion of the asset owned by the bank is leased
out to the client for use under specific conditions (like rent) and then, the client buys the bank’s portion
upon agreed upon terms.
Qard: Qard refers to interest-free loan provided by Islamic banks to its clients. According to
various authors ‘the main aim of this loan is to help needy people in a society in order to, make them
self-sufficient and to raise their income and standards of living.

3.Brief overview on Islamic Banking in Bangladesh

At the end of March 2023, there are 10 full-fledged Islamic banks in Bangladesh operating with
1661 branches while there were total of 11165 branches of the whole banking system. In addition, 23
Islamic banking branches of 11 conventional commercial banks and 550 Islamic banking windows of 13
conventional commercial banks are also providing Islamic financial services in Bangladesh.
Table 3.1: Number of Islamic Banks, Branches and Windows
Bank Name Full-fledged Islamic Banks Islamic Banking Islamic Banking Windows
Branches in in Conventional Banks
Conventional Banks
1 Islami Bank Bangladesh Limited The City Bank Limited Sonali Bank Limited (58)
(394) (1)
2 ICB Islamic Bank Limited (33) AB Bank Limited (1) Janata Bank Limited*
3 Social Islami Bank Limited (179) Dhaka Bank Limited Agrani Bank Limited (60)
(2)
4 Al-Arafah Islami Bank Limited Premier Bank Limited Pubali Bank Limited (17)
(209) (2)

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 5 EXIM Bank Limited ( 148) Prime Bank Limited (5) Trust Bank Limited (30)
6 Shahjalal Islami Bank Limited Southeast Bank Bank Asia Limited (5)
(140) Limited (5)
7 First Security Islami Bank Jamuna Bank Limited Standard Chartered Bank
Limited (209) (2) (1)
8 Union Bank Limited (112) Bank Alfalah Limited Mercantile Bank Limited
(1) (46)
9 Standard Bank Limited (138) NRB Bank Limited (1) Midland Bank Limited (1)
10 Global Islami Bank Limited (99) One Bank Limited (2) NRBC Bank Limited (268)
11 United Commercial One Bank Limited (14)
Bank PLC (1)
12 Meghna Bank Limited (10)
13 Mutual Trust Bank
Limited(15)
14 Premier Bank Limited (25)

4. Activities of Islamic Banking in Bangladesh: January-March 2023

Islamic Banking has significant contributions towards the growth and economic development of
Bangladesh. The system seems progressively attractive and profitable to conventional banks for their
lower Statutory Liquidity Ratio (SLR) and higher Investment-Deposit Ratio (IDR). It is evident that, the
system has experienced phenomenal growth and expansion in the country as the deposits and
investments have increased significantly over the time. Basic information on Islamic banking has been
given in Table 1.1 and is briefly discussed below:
Total deposits in Islamic banking stood at BDT 4116.31 billion at the end of March 2023 with an
increase of BDT 16.82 billion or 0.41 percent as compared to the end of December 2022. It was also
higher by BDT 119.51 billion or 2.99 percent as compared to the same quarter of the last year.
Total investment (loans & advances in conventional banking) of Islamic banking stood at BDT
4123.97 billion at the end of March 2023 which went up by BDT 71.95 billion or 1.78 percent and
BDT 517.48 billion or 14.35 percent as compared to the end of December 2022 and the end of same
quarter of the last year respectively.
Investment-Deposit ratio of the Islamic banks stood at 0.92 at the end of March 2023(Excluding
Export Development Fund (EDF) and refinance) which was same at the end of December 2022 but
higher than 0.90 of end March 2022.
Excess liquidity of Islamic banking stood at BDT 77.08 billion at the end of March 2023 which
was lower by BDT 51.64 billion or 40.12 percent and BDT 222.91 billion or 74.31 percent than that of
the end of December 2022 and the same period of the last year respectively.
Total exports receipts by the Islamic banks stood at BDT 292.53 billion during January-March
2023, which was lower by BDT 48.45 billion or 14.21 percent and BDT 37.98 billion or 11.49 percent
than that of the previous quarter and the same quarter of 2022 respectively.

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 Total imports payments by the Islamic banking stood at BDT 416.32 billion during January-
March 2023, which was higher by BDT 38.08 billion or 10.07 percent but lower by BDT 135.88 billion
or 24.61 percent than that of the previous quarter and the same quarter of 2022 respectively.
Total remittances mobilized by the Islamic banking stood at BDT 306.09 billion during January-
March 2023, which was higher by BDT 49.19 billion or 19.15 percent and BDT 171.39 billion or 127.24
percent than that of the previous quarter and the same quarter of 2022 respectively.
The number of branches of Islamic banking including Islamic branches and windows of
conventional commercial banks extended to 2234 at the end of March 2023 which was 2217 at the end
of December 2022 and 2154 at the end of March of the last year.
Total employment in the Islamic banking stood at 50143 at the end of March 2023 which was
49851 at the end of December 2022 and 47927 at the end of March 2022.

Table 4.1 Basic information on Islamic Banking: January-March 2023

(in Billion BDT)
Indicators of Islamic Banking January October- January Changes Changes (%)
- March Decemb - March Quarterly Annual Quarterly Annual
2023 er 2022 2022
1. Total Deposits*(Outstanding) 4116.31 4099.49 3996.79 16.82 119.51 0.41 2.99
a) Full-fledged Islamic Banks 3795.24 3799.51 3743.55 -4.27 51.69 -0.11 1.38
b) Islamic Banking Branches of CB 153.80 138.83 123.51 14.97 30.29 10.79 24.53
c) Islamic Banking Windows of CB 167.27 161.16 129.74 6.11 37.53 3.79 28.93
2. Total Investment* 4123.97 4052.02 3606.49 71.95 517.48 1.78 14.35
(Outstanding)
a) Full-fledged Islamic Banks 3881.01 3835.84 3420.90 45.17 460.11 1.18 13.45
b) Islamic Banking Branches of CB 129.85 105.18 103.90 24.68 25.95 23.46 24.98
c) Islamic Banking Windows of CB 113.11 111.00 81.69 2.10 31.41 1.89 38.45
3. Investment-Deposit ratio 0.92 0.92 0.90 0.00 0.02 0.00 1.96
a) Full-fledged Islamic Banks 0.94 0.93 0.91 0.01 0.03 1.51 3.31
b) Islamic Banking Branches of CB 0.73 0.69 0.84 0.04 -0.11 5.99 -13.07
c) Islamic Banking Windows of CB 0.65 0.65 0.63 0.00 0.02 0.11 3.34
4. Liquidity(Excess( +)/Shortfall 77.08 128.71 299.99 -51.64 -222.91 -40.12 -74.31
(-)
a) Full-fledged Islamic Banks 19.90 82.34 251.37 -62.44 -231.48 -75.84 -92.09
b) Islamic Banking Branches of CB 19.26 14.58 18.57 4.69 0.69 32.15 3.74
c) Islamic Banking Windows of CB 37.92 31.80 30.04 6.12 7.87 19.24 26.21
5. Total Exports 292.53 340.98 330.51 -48.45 -37.98 -14.21 -11.49
a) Full-fledged Islamic Banks 271.91 282.35 306.84 -10.44 -34.93 -3.70 -11.38
b) Islamic Banking Branches of CB 13.32 38.27 18.04 -24.95 -4.72 -65.19 -26.14
c) Islamic Banking Windows of CB 7.30 20.35 5.63 -13.06 1.67 -64.15 29.64
6. Total Imports 416.32 378.25 552.20 38.08 -135.88 10.07 -24.61
a) Full-fledged Islamic Banks 378.90 307.33 511.87 71.56 -132.98 23.28 -25.98

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 b) Islamic Banking Branches of CB 16.64 36.53 21.86 -19.90 -5.22 -54.46 -23.89
c) Islamic Banking Windows of CB 20.79 34.38 18.47 -13.59 2.32 -39.53 12.57
7. Total Remittances 306.09 256.91 134.70 49.19 171.39 19.15 127.24
a) Full-fledged Islamic Banks 304.33 254.03 132.88 50.29 171.45 19.80 129.03
b) Islamic Banking Branches of CB 1.14 1.64 1.05 -0.50 0.09 -30.48 8.26
c) Islamic Banking Windows of CB 0.62 1.23 0.77 -0.61 -0.15 -49.47 -19.17
8. Total Number of Branches 2234 2217 2154 17 80 0.77 3.71
a) Full-fledged Islamic Banks 1661 1659 1679 2 -18 0.12 -1.07
b) Islamic Banking Branches of CB 23 23 41 0 -18 0.00 -43.90
c) Islamic Banking Windows of CB 550 535 434 15 116 2.80 26.73
9. Total Number of Manpower 50143 49851 47927 292 2216 0.59 4.62
a) Full-fledged Islamic Banks 48844 48588 46777 256 2067 0.53 4.42
b) Islamic Banking Branches of CB 495 485 418 10 77 2.06 18.42
c) Islamic Banking Windows of CB 804 778 732 26 72 3.34 9.84

4.1 The Market Share of Islamic Banks

The market share of Islamic banks is successively increasing over the time. At the end of March
2023, Islamic banks represents 27.02 percent share in terms of deposits and 28.15 percent share in terms
of investments in the total banking industry which was 25.73 percent and 28.12 percent respectively at
the end of December, 2022 [Table 1.2 and Chart 1].
Table 4.2 Performances of Islamic Banks Compared to All Banks in Bangladesh
(In Billion BDT)
Items January-March 2023p October-December
2022R
All banks Islamic Share of Islamic Share of Islamic banks
banks banks among all among all banks
banks (percent) (percent)
1 2 3=(2/1*100) 4
Total deposits 15232.96 4116.31 27.02 25.73
Total investment (loans &
advances in conventional 14650.13 4123.97 28.15 28.12
banking system)
Remittances 559.01 306.09 54.76 54.53
Total excess liquidity 1368.42 77.08 5.63 6.60
Total number of bank 11165 2234 20.01 19.88
branches
Total agricultural credit 74.52 15.48 20.78 16.94
Source: Statistics Department, MPD, BRPD and ACD, Bangladesh Bank. Note: Stock figures are provided on end
period basis. P=Provisional, R=Revised.

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 Islamic Banking Activities Compared to All
Banks in Bangladesh (January-March2023)
16000
12000
8000
4000
0

All banks Islamic banks

Chart 1:Islamic Banking Activities Compared to All Banks in Bangladesh(January-March 2023)

5. Mobilization of Deposits by Islamic Banking

Total deposits in Islamic banking system reached at BDT 4116.31 billion at the end of March
2023 with an increase of BDT 16.82 billion or 0.41 percent as compared to the end of December 2022. It
was also higher by BDT 119.51 billion or 2.99 percent as compared to the same quarter of the last year.
Among the total deposits, demand deposit was BDT 518.18 billion and time deposit was BDT 3598.13
billion. The share of total deposits of Islamic banks accounted for 27.02 percent among whole banking
sector at the end of March 2023. Deposits of 10 full-fledged Islamic banks stood at BDT 3795.24
billion, windows of conventional banks 167.27 billion and branches of conventional banks 153.80
billion at the end of March 2023. Total deposits of the 10 full-fledged Islamic banks accounted for 92.20
percent of deposits of the Islamic banking system. Among all Islamic banks, Islami Bank Bangladesh
Limited (IBBL) received the highest amount of deposits (34.29%) followed by First Security Islami
Bank Ltd. (11.10%), Al-Arafah Islami Bank Ltd. (10.48%), EXIM Bank Ltd. (10.45%), Social Islami
Bank Ltd. (7.70%), Shahjalal Islami Bank Ltd. (5.79%), Union Bank Limited (5.16%), Standard Bank
Ltd. (4.08%), Islamic banking windows (4.06%), Islamic banking branches (3.74%), Global Islami Bank
(2.86%) and ICB Islamic Bank Limited (0.30 %) [Chart-2].

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 Islami Banking Branches
4% Islami Banking Windows
Global 4%
Union Islami IBBL
Bank 3% 34%
5% SBL
4%

FSIB
11%

Shah- EXIM SIBL ICB

jalal Is- 10% 8% 0%
lami
6%
Al-Arafah
10%

Chart 2: Share of Deposits of allI slamic Banks (January-March 2023)

5.1 Types of Deposits

Among different types of deposits of the Islamic banking industry, Mudaraba Term Deposits
(MTD) secured the highest position (45.85 %) followed by Mudaraba Savings Deposits (MSD)
(19.59%), Other Deposits (16.58%), Mudaraba Special Savings (pension/profit) Deposits (7.48%),
Mudaraba Special Notice Deposits (5.30%), Al-Wadeeah Current Account Deposits (4.59%), Mudaraba
Savings Bond (0.41%) and Mudaraba Hajj Deposits (0.20%) during January- March 2023 [Chart-3].

Al-Wadeeah Current Account

Deposits Mudaraba Savings Bond Mudaraba Hajj Deposits
5% 0% 0%
Mudaraba
Special No- Other Deposits
tice Deposits 17%
5% Mudaraba Term Deposits
46%

Mudaraba
Special Sav-
ings
7%
Mudaraba Savings Deposits
20%

Chart 3:Types of Deposits, January-March 2023

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6. Investments of Islamic Banking
Total investment (loans & advances) of Islamic banking system stood at BDT 4123.97 billion at
the end of March 2023 which went up by BDT 71.95 billion or 1.78 percent and BDT 517.48 billion or
14.35 percent as compared to the end of December 2022 and the end of same quarter of the last year
respectively. The share of total investment of Islamic banks accounted for 28.15 percent among total
loans & advances of entire banking industry.
Out of total investment of Islamic banking system, 94.11 percent was materialized by 10 full-
fledged Islamic banks, 3.15 percent by the Islamic banking branches of conventional banks and the rest
2.74 percent by the Islamic banking windows of conventional banks. Among the 10 full-fledged Islamic
banks, Islami Bank Bangladesh Ltd. affixed the highest investment (33.61%) at the end of March 2023
followed by First Security Islami Bank Ltd. (13.07%), EXIM Bank Ltd. (10.75%), Al-Arafah Islami
Bank Ltd. (10.29%), Social Islami Bank Ltd. (7.96%), Shahjalal Islami Bank Ltd. (5.64%), Union Bank
Ltd. (5.51%), Standard Bank Ltd. (4.15%), Global Islami Bank (2.94%) and ICB Islamic Bank Ltd.
(0.19%) [Chart-4].

Islami Banking Branches Islami Banking Windows

3% 3%
Union IBBL
Bank Global
34%
6% Islami
SBL 3%
5%
FSIB
13%

Shah- EXIM SIBL ICB

jalal Is- 11% 8% 0%
lami
6%
Al-Arafah
10%

Chart 4: Share of Investments Made by Islamic Banks(January-March 2023)

6.1 Sector-wise Investment

In case of the sector-wise investment, Trade and Commerce sector was secured the highest
position (38.23%) among all sectors at the end of March 2023 followed by Large Industry (28.32%),
CMSMEs (Cottage, Micro, Small and Medium Enterprises (9.93%), Construction (6.61%),
Miscellaneous (5.62%), Services Industry (5.57%), Consumer Finance (2.31%), Agriculture, Fishing
and Forestry (1.96%), Transport (0.92%), and Other Institutional Loan (0.53%), [Chart-5].

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 Agriculture, Fishing and
Consumer Finance Forestry Transport Other Institutional Loan
2% 2% 1% 1%
Services Indus-
try
6%
Miscellaneous
6%
Construction Trade and Commerce
7% 38%
CMSMEs
10%

Large Industry
28%

Chart 5: Sector-wise Investment ( January-March 2023)

6.2 Mode Wise Investments

The analysis of mode-wise investment revealed that the highest investment was materialized
through Bai-Murabaha (47.28%) at the end of March 2023 followed by Bai-Muajjal (22.92%), HPSM
(18.03%), Ijara & Ijara-bil Bai (4.01%), Bai-Salam (1.66%), Quard with Security (0.95%), Musharaka
(0.27%), Mudaraba (0.24%), Bai-Istisna (0.03%) and Others (4.59%) [Chart-6].

Quard with Security Musharaka Mudaraba Bai-Istisna Others

1% 0% 0% 0% 5%
Bai-Salam
2%
Ijara & Ijara-bil
Bai HPSM
4% 18%
Bai-Murabaha
47%

Bai-Muajjal
23%

Chart 6: Mode-wise Investment of Islamic Banks (January- March 2023)

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6.3 Investment in the Agricultural Sector
Islamic banking system has made significant contributions to financing different sub-sectors of
agricultural and rural credit programs. During January-March 2023, investment in agricultural sector
made by Islamic banking system reached at BDT 17.98 billion which was lower by BDT 2.06 billion
and BDT 1.04 billion than that of the end of previous quarter and the same quarter of the preceding year
respectively. The share of total agricultural credit of Islamic banks accounted for 20.78*percent among
all banks during the quarter under report (Table-1.2). Summary of investments in agricultural sector
under the Islamic banking framework is provided in Table-3.
Table 6.1: Summary of Investment in Agricultural Sector
(In Billion BDT)
Investment in Agricultural Sector

Period Investment Actual Target Recovery Outstanding Overdue Classified

Target Investment Achieved Investment Investment Investment
Disburseme (%)
nt

1 2 3 4 5 6 7 8

January-March 20.13 17.98 89.29 17.64 49.02 22.90 21.21

2023p

October-December 21.45 20.03 93.40 18.98 51.26 23.11 21.49

2022

January-March 18.55 19.01 102.49 16.04 49.90 7.08 17.60

2022

Quarterly Changes -1.32 -2.06 - -1.34 -2.24 -0.21 -0.28

Annual Changes 1.58 -1.04 - 1.60 -0.88 15.82 3.61

Source: Islamic banks, branches and windows of conventional banks. P= Provisional.

*= Excluding Islamic banking branches and windows of conventional banks

7.Foreign Exchange Dealings and Remittance Mobilizations by Islamic Banking

7.1 Exports
Total exports receipts by the Islamic banks stood at BDT 292.53 billion during January- March
2023, which was lower by BDT 48.45 billion or 14.21 percent and BDT 37.98 billion or 11.49 percent
than that of the previous quarter and the same quarter of 2022 respectively. Among the Islamic banking
system, Islami Bank Bangladesh Ltd. secured the top position (29.38%) in exports earning during
January-March 2023, followed by Shahjalal Islami Bank (21.18%), EXIM Bank Ltd. (20.01%), Al-
Arafah Islami Bank Ltd. (9.28%), Social Islami Bank Ltd (6.00%), Islamic banking branches of

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conventional banks (4.55%), Standard Bank Ltd. (3.55%), First Security Islami Bank Ltd (3.02%),
Islamic banking windows (2.49%), Union Bank Ltd (0.37%), Global Islami Bank (0.16%), and ICB
Islamic Bank (0.01%) [Chart-7].

Islami Banking Branches Islami Banking Windows

5% 2%
Global Is- IBBL
lami 29%
0%
SBL
Union Bank 4%
0% Shahjalal Islami
21%
FSIB
3%
SIBL ICB
6% 0%
EXIM
20%
Al-Arafah
9%

Chart 7: Exports By Islamic Banking System (January-March 2023)

7.2 Imports
Total Imports payments by the Islamic banking system stood at BDT 416.32 billion during
January-March 2023, which was higher by BDT 38.08 billion or 10.07 percent and lower by BDT
135.88 billion or 24.61 percent than that of the previous quarter and the same quarter of 2022
respectively. Among the Islamic banking system, Islami Bank Bangladesh Ltd. secured the top
position (33.61%) in Imports during January-March 2023, followed by Shahjalal Islami Bank (18.12%),
EXIM Bank Ltd. (14.73%), Al-Arafah Islami Bank Ltd. (10.82%), Social Islami Bank Ltd (7.99%),
Islamic banking windows (4.99%), Islamic banking branches of conventional banks (4.00%), First
Security Islami Bank Ltd (3.18%), Standard Bank Ltd. (2.01%), Union Bank Ltd (0.29%), Global Islami
Bank (0.20%), and ICB Islamic Bank (0.06%) [Chart-8]

Islami Banking Islami Banking Windows

Branches 5%
4%
Global Islami
0%
IBBL
SBL 34%
Shahjalal Islami
Union Bank2%
18%
0%
FSIB
3%

EXIM SIBL
15% 8% ICB
0%

Al-Arafah
11%

Chart 8: Imports By Islamic Banking System (January-March 2023)

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7.3 Remittance Mobilizations
Islamic banking sector is playing a vital role in collecting foreign remittances and distributing it
among beneficiaries across the country. Total remittance mobilized by the Islamic banking system stood
at BDT 306.09 billion during January- March 2023, which was higher by BDT 49.19 billion or 19.15
percent and BDT 171.39 billion or 127.24 percent than that of the previous quarter and the same quarter
of 2022 respectively. Among the Islamic banking system, Al- Arafah Islami Bank Ltd. secured the top
position (43.38%) in remittance mobilization during January-March 2023, followed by Islami Bank
Bangladesh Ltd. (41.80%), Social Islami Bank Ltd (8.99%), Global Islami Bank Ltd. (1.56%), First
Security Islami Bank Ltd (1.53%), Shahjalal Islami Bank Ltd. (1.37%), EXIM Bank Ltd. (0.43%),
Islamic banking branches of conventional banks (0.37%), Islamic banking windows (0.20%), Union
Bank Ltd (0.18%), Standard Bank Ltd. (0.18%), and ICB Islamic Bank Ltd. (0.01%) [Chart-9].

Shahjalal Islami
EXIM Union SBL Islami Islami Banking Branches
FSIB Bank Global Islami Banking Windows
0% 1% 2% 0% 0% 2% 0% 0%

IBBL
42%

Al-Arafah
43%

SIBL
9%

ICB
0%

Chart 9: Share of Remittances mobilized by Islamic Banks (January-March2023)

8. Conclusion and Recommendation

Banking sector is one of the fast growing industries in Bangladesh and it plays a unique role in
the economic development of Bangladesh. Banks deposits may be considered as the most important
variable for economic development in Bangladesh since deposits through investment plays a vital role in
this process. Therefore, the amount of deposit of banks should be mobilized and accumulated enough so
that it can satisfy the financial needs of its customers. Islamic banking system has been playing
significant role in mobilizing deposits and financing in various economic activities in Bangladesh since
its inception. At present, Islamic banking system has been representing more than 27 percent share of
deposit and 28 percent share of investment of the total banking sector.
Although Islamic banking activities are growing in Bangladesh, the number of rural branches of
full-fledged Islamic banks has not kept pace with demand. They should also focus more on expanding
their outreach into rural areas.

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 Islamic banks should invest more in socially beneficial industries, particularly in agriculture and
small businesses. The investments made by Islamic banks in ideal Islamic modes like Mudaraba and
Musharaka are still at a minimal level. Given this, Islamic banks should pay more attention to develop
proper guidelines and policies to promote investments under Mudaraba and Musharaka modes. Islamic
banks may also explore new sectors of customers in microfinance projects, supporting woman
entrepreneurs and meeting the financial needs for government agencies, which are not currently served
by conventional banks. This will give Islamic banks a great advantage to flourish.
To address Shariah compliance issues of Islamic financial industry properly, adoption of Shariah
standards at par with international accounting and auditing organizations will be useful. In this regard,
Islamic banks and conventional banks having Islamic banking branches and windows may undertake
necessary action to become the member of Accounting and Auditing Organization for Islamic Financial
Institutions (AAOIFI).
In line with BB’s efforts Islamic banks, branches and windows should adopt all kinds of
technological innovations and digital banking for deeper financial inclusion and moving toward a
cashless society in Bangladesh,

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