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Islamic bankers Wednesday blamed organised state-sponsored financial crime for weakening Islamic banking in Bangladesh and suggested remedial measures for a rebound.
"The growth of Islamic banks was weakened by state-sponsored financial crime," said Managing Director of Islami Bank Md Omar Faruk Khan, mentioning happenings in their precincts.
He notes that share of Islamic banking in the overall banking industry would have been much higher if not headed off through such marauding.
He made the observations at a review workshop on 'Islamic banking operations', organised by the Bangladesh Institute of Bank Management (BIBM) at the Institute.
Speaking at the meet, top bankers sought a comprehensive long-term roadmap, stronger Shariah governance and improved risk-management frameworks to ensure a sustainable growth of Islamic banking in the changed situation.
Also is there a need for building capacity through development of skilled Shariah auditors, certification programmes and professional training to strengthen the industry's knowledge base.
Discussants at the workshop urged the government, the University Grants Commission (UGC) and other educational institutions to introduce honours, masters and higher degrees to cater the growing demand for skilled manpower in the expanding Islamic banking.
Deputy Governor of Bangladesh Bank Nurun Nahar told the meet that "despite plunders of Islamic banks, the banks are regaining strengths".
She underscores creating skilled manpower for Islamic banks.
Ms Nahar also stressed the need for awareness among customers and bankers for compliant banking.
The IBRPD Director of Bangladesh Bank, Mohammad Anisur Rahman, said the central bank is formulating a Sharia supervisory committee to ensure greater compliance in Islamic banks.
He notes that Islamic banks could introduce more financial instruments to expand their scope, and the central bank has been working in this regard.
He also points out that Islamic banks have the potential to invest in infrastructure projects -- such as bridges, roads, and metro rail -- through Sukuk bonds.
First Security Islami Bank Chairman Mohammad Abdul Mannan said formal education on Islamic banking would play a transformative role in the sector's expansion.
He emphasizes that the central bank "should be stronger and more independent in policy formulation and in protecting the interests of banks".
He also urges bankers to uphold morality and transparency in their operations.
A review paper presented at the workshop has highlighted that the market share of Islamic banking is now estimated at over 15 per cent, making it systemically important to the country's financial system.
Despite having the achievement, the paper notes, Bangladesh still lags behind global leaders like Malaysia in terms of visibility and influence in Islamic financing, largely due to the absence of a "state-led strategic vision".
The document carries recommendations that the Islamic Banking Regulation and Policy Department (IBRPD) of Bangladesh Bank should take the lead in preparing a long-term vision document for the sector.
Such a plan, according to the paper, would not only prevent 'unsustainable' growth but also uphold Bangladesh's position more prominently in the global Islamic finance arena.
The paper also laid importance on reviewing and updating contract forms and product guidelines by competent Shariah scholars on a regular basis.
It also underscored the need for strengthening the Shariah Supervisory Committees (SSC) through improved composition, formal performance evaluation, and continuous professional development.
It also suggests establishment of a national panel of certified Shariah advisors under Bangladesh Bank.
Besides, Islamic banks should set up dedicated Shariah research wings for the sake of innovative and Shariah-compliant solutions, it is stated in the review paper.
It, however, says research capacity of Islamic banks should be treated as a strategic investment to help strengthen their sustainability and competitiveness.
On the regulatory and accounting aspects, the paper suggests that Bangladesh is gradually adopting international standards, developed by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), to help ensure better reflections of Islamic-banking features.
Regarding the risk management, some recommendations were made in the workshop, including developing a risk-based capital-adequacy framework for Islamic banks, recognising Shariah non-compliance risk as a core operational risk, and adopting standards set by the Islamic Financial Services Board (IFSB).
The workshop also revisited earlier BIBM proposals, such as establishing a separate Islamic Banking Act, empowering the Central Shariah Board, creating a Shariah Appellate Bench at the High Court, and introducing Sukuk and other innovative financial instruments.
Expanding rural outreach, improving transparency, and preparing a national report on Islamic banking and finance were also suggested to support growth and inclusion.
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