"With its ethical, inclusivity promoting and stability enhancing attributes, Islamic finance undoubtedly bears the promise of playing a major beneficial role in our socioeconomic development," the central bank chief said while speaking at a seminar held in a local hotel Monday.
The two-day-long seminar on 'the prospects and challenges in the development of Islamic finance for Bangladesh' was organised jointly by the Islamic Financial Services Board (IFSB) and the BB.
Dr Rahman said Islamic finance market participants must exercise utmost caution in steering clear of any involvement with extremist dogma driven influences aiding or abetting terrorism; meticulously adhering to anti-money laundering (AML) compliance routines prescribed by BB's financial intelligent unit (FIU).
Islamic finance commenced in Bangladesh in early 1980s with just one Islamic commercial bank. By now there are eight Islamic banks run wholly on Shariah principles.
Besides, as many as 17 conventional banks, including one globally active foreign bank, are running Islamic banking branches or windows side by side with their conventional banking, according to the central bank statistics.
"Â .approval requests of a number of conventional banks for their conversion into wholly Shariah-based Islamic banks indicate robust customer demand in Bangladesh for Islamic financial services," the BB governor noted.
He also said the BB has taken a move for structuring some appropriate Shariah-compliant small and medium enterprises (SME) refinance support line for the Islamic banks.
"Apart from Islamic banking, Takaful or Islamic insurance is also now gaining ground in our financial market," the central bank governor said.
Barring one exception of a small sick Islamic bank in process of restructuring, the Islamic banks in Bangladesh generally have higher capital adequacy ratios and lower non-performing loan ratios than their conventional banking counterparts, according to the BB governor.
He also said aggregate assets and deposits of Islamic banks in Bangladesh have nearly doubled in the last four years; by end of 2012 aggregate assets and deposits both crossed the trillion taka threshold, comprising around a fifth of total banking sector assets and liabilities.
"This share of Islamic banking looks set to grow further with time, given its faster growth than conventional banking," the BB governor said.
Speaking on the occasion Secretary General of the IFSB Jaseem Ahmed said Islamic finance is contributing to the deepening and widening of the global financial system through the use of innovative, Shariah-compliant, contractual forms.
"Priority must be given to the creation of an enabling financial infrastructure consisting of common international standards for supervision and regulation, as well as for transparency and disclosure," Mr Ahmed noted.
A collaborative effort between the supervisory authority, policy-makers and market players is the key to maintaining the balance between strong regulation and the market's ability to grow, according to the IFSB secretary general.
"At the end of day, we must be guided, in promoting Islamic finance, by the recognition that an enterprise has value only if it helps to transform the lives of ordinary human beings," he noted.
Kuala Lumpur-based the IFSB was officially inaugurated on November 3, 2002 and started operations on March 10, 2003.
It serves as an international standard-setting body of regulatory and supervisory agencies that have vested interests in ensuring the soundness and stability of the Islamic financial services industry, which is defined broadly to include banking, capital market and insurance.
Currently, 187 members of the IFSB comprise 57 regulatory and supervisory authorities, eight international inter-governmental organisations - such as the World Bank, the International Monetary Fund (IMF) and Asian Development Bank (ADB) - and 122 market players, professional firms and industry associations operating in 43 jurisdictions.
(The Financial Express/ 24 Sept 2013)
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com