Experts at a seminar on Wednesday called for introducing 'Sukuk' in the country as it can help the Islamic banks mobilise fund while managing liquidity.
Sukuk means Islamic securities that are often translated as 'Islamic bonds.'
Sukuk can also be a better option for raising funds for the large scale construction or for long term financing, they said.
The views came at a seminar on the diversification of products in Islamic banking arena of the country.
Bangladesh Institute of Bank Management (BIBM), a banking research and training institute, organised the event.
Experts at the seminar noted although Bangladesh has developed a sizeable Islamic finance industry, the Sukuk market has not bloomed yet.
"Sukuk has got every potential in this market", said Md. Alamgir, Associate Professor of BIBM, who was the keynote speaker at the event.
"The introduction of Sukuk has become the need of the time to expand the Islamic banking activities in Bangladesh," he added.
Experts, however, said a closer look at Sukuk shows that it has elements that resemble both share and bond.
"Sukuk is an Islamic alternative to conventional bond, which has drawn much attention to the financial world as a superior instrument for catering the direct financing needs of the government, financial institutions and large-scale corporate bodies", Mr Alamgir said.
Researchers said that no instrument in the name of Sukuk had been issued in Bangladesh due to the regulatory deficiency.
However, some instruments have been issued in the market labeled as 'bond,' which are Sukuk.
"There are numerous success stories of Sukuk, especially in infrastructure and long term financing, which can be replicated in our country," the BIBM academic said.
"It can also help roll out the ill projects too," he added.
Experts observed that Sukuk can contribute to the enhancement of the depth of capital market in the country.
"As a financial tool, Sukuk enables more diversified financing for government and private sector entities alike," Mr Alamgir said.
"The large business houses can also consider Sukuk to be an effective source of financing," he added.
Besides, it can mobilise funds from other countries, as such enriching foreign direct investment, experts noted.
The expansion of Sukuk market may contribute in proper liquidity management of the Islamic banks, they said.
Speaking at the seminar, deputy governor of Bangladesh Bank Abu Hena Mohd. Razee Hassan said the government is thinking about the development of Sukuk market in the country.
"We have already framed separate policies for Islamic banks regarding their liquidity management. Moreover, we have Islamic Inter-bank Fund Market (IIFM) and Bangladesh Government Islamic Investment Bond (BGIIB), which are used as money market instruments," he said.
He acknowledged more needs to be done for devising more products to meet the demands for the industry.
Former managing director of Islami Bank Limited and Exim Bank Limited Md. Fariduddin Ahmed said there are wide varieties of Islamic banking products in the market.
However, there is a lack of awareness among the customers about those products.
"Banks should also develop some Islamic banking products targeted towards the agriculture sector," argued Helal Ahmed Chowdhury, supernumerary professor of BIBM.
Underlining the need for more customisation of Islamic banking products, managing director and CEO of Islami Bank Bangladesh Limited Md. Mahbub-ul-Alam said that more customisation of products would decrease the default rate.
Managing director of Export Import Bank Dr. Mohammad Haider Ali Miah, in his speech, called for introducing Shariah-based savings certificates, repurchase agreements (Repo) and reverse repo.
Noting the market share of Islamic banking has stagnated in recent years, supernumerary professor of BIBM Yasin Ali said the competitive products must be introduced in the Islamic banking arena to attract more customers.
And such products need to be properly marketed, he added.
Speakers at the event called for more investments in research to bring new innovative products within the Islamic banking scheme.
Director General of BIBM Toufic Ahmad Choudhury also spoke on the occasion.