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The country's Islamic banks, despite having considerable rise in investments and assets, experienced a slowdown in deposit growth and a shrinking market share of investments over the months.
According to latest Bangladesh Bank (BB) data, the volume of investment in the country's Islamic banking system grew by 12.52 per cent to reach Tk 5.67 trillion in May 2025 from Tk 5.04 trillion in May 2024.
Although Islamic banks operating in Bangladesh saw a steady growth over the months, their market share in the total banking operations declined slightly as the conventional banking system outpaced them.
The conventional banks' share in terms of investment grew by 10.78 per cent to Tk 16.90 trillion in May 2025 from Tk 15.26 trillion in May 2024, the BB data showed.
Conventional banks dominated in capturing shares in investment which is around 75 per cent of total investments, the Central Bank data showed.
According to the BB data, although both the conventional and Shariah-based banks experienced positive growth in investment, the conventional banks' role in making investments available to the economy was stronger than that of Islamic ones.
Experts said the Islamic banking sector continued to show encouraging growth in investments and assets over the months until May 2025, highlighting its increasing role in the country's financial landscape.
Dr. Masrur Reaz, Chairman of Policy Exchange Bangladesh, said: "Islamic Banks in Bangladesh have shown solid growth in investments and assets over the past year, reflecting its increasing role in the economy."
However, slower deposit growth and a decline in remittance shares indicate challenges in maintaining competitiveness with conventional banks, which continue to dominate overall market share, Dr Reaz observed.
The country's Islamic banking system witnessed a moderate 3.19 per cent growth in deposits, increasing from Tk 4.29 trillion in May 2024 to Tk 4.42 trillion in May 2025.
Such lower-than-expected level of investment growth indicates a slower pace of growth compared to the conventional banking sector, according to banking sector experts.
The volume of aggregate deposits in the country's banking sector increased to Tk 19.75 trillion in May 2025 from Tk 18.14 trillion in May 2024, reflecting an approximately growth of 8.90 per cent, the central bank data showed.
The country's conventional banks posted a 10.66 per cent growth in terms of deposits with the volume rising to Tk 15.33 trillion in May 2025 from Tk 13.85 trillion in May 2024.
During this period under review, Islamic banks' market share in deposits dropped to 22.40 per cent in May 2025 compared to that of 23.64 per cent in May 2024.
On the other hand, the total assets of Islamic banks operating in Bangladesh increased Tk 9.21 trillion in May 2025 from that of Tk 8.11 trillion in May 2024, marking a robust growth of approximately 13.56 per cent, according to the central bank figures.
However, Islamic banks' share in dealing with remittances declined to around 31 per cent as of May 2025 compared to that of 36 per cent in early 2024.
Citing figures, the BB data showed that Islamic Banks started from $ 764 million in November 2023 and decreased to $ 660 million at the end of May 2025. The reason behind this may be loss of confidence of the foreign workers on Islamic banks for improper management of the banks during the period under study.
The BB data revealed that in May 2024, Islamic banks' share to the total deposits in the agent banking was 54.47 per cent with the figure amounting to Tk 206 billion. The amount rose to about Tk 235 billion in May 2025, reflecting a 14.41 per cent growth over the corresponding period.
When asked, Dr Reaz suggested that Islamic banks need to strengthen customer confidence, improve operational efficiency, and focus on expanding their reach in both deposits and remittance services for their greater sustainability.
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