Diversification of Islamic Financial Insturments
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no specific or customized Islamic Sharia'h- based products in Bangladesh Capital Market. To
uphold the integrity of the market and meet the demand of an increasingly sophisticated
investor class, there is a need to strengthen the policy and market practices of Islamic capital
markets. The key components of the Islamic finance value chain have been firmly set in place,
the industry is still facing various challenges at both regional and global levels given its nascent
level of development. Many jurisdictions that operate Islamic finance sectors and offer
Sharia'h-compliant financial solutions are yet to develop holistic regulatory frameworks and
legislation that enable smooth functioning of the Islamic financial system. There is a critical
need for regulatory support to drive the growth of Islamic finance. Pressing matters include
the need for: (1) an appropriate supervisory environment that caters to the unique features of
Islamic financial products; (2) a wider understanding of Sharia'h practices, and of the
differences between the Islamic financial system and the conventional system; (3) the
adoption of accounting and auditing standards that recognize the unique features of Islamic
finance transactions; (4) the introduction of Sharia'h-compliant financial instruments to
manage the excess liquidity of Islamic banks; (5) standardization of products and other-related
documents; (6) the drafting of clear rules and practices for dispute settlement in transactions;
and (7) the development of human resources that are well-versed in both Sharia'h matters and
the dynamics of the financial industry.
Islamic Capital Market sector has high potential in Bangladesh. But this potential needs proper
nourishment from both the organizations and regulatory body. The government should take
some major steps for the betterment of this sector. The government itself can establish an
Islamic Capital Market organization to improve the faith of people in this sector. This will also
encourage people to become more aware of the products and scopes of Islamic Capital Market
sector. This will drastically improve the condition of Islamic Capital Market sector in
Bangladesh. More regulatory framework should also be developed, by the government, in favor
of this sector.
Islamic insurance in Bangladesh has been facing numerous problems. The nature of the
problems is lack of separate Takaful regulation, Shariah-based Islamic capital market
for Islamic insurance etc. The present socio-economic scenario of the Bangladesh Takaful
market appears to be not very conducive and supportive for its growth and development. The
framework of Takaful regulations and guidelines in Bangladesh is almost absent. It takes a long
time to formulate policies and guidelines. Furthermore, in the stock market, Takaful companies
are under obligation to invest funds with Shariah compliant companies. Shariah compliant
companies are not too many, which restricts the investments within limited circle and forcing
them to receive lower rate of returns. But the biggest problem is regulatory requirement to
invest 30% of the investable funds with Government Securities and Bonds.
Why Bangladesh is an Interesting Islamic Finance Case Study
Islamic bank has been established in Bangladesh in 1983 which was first step in the South East
Asian region. The Islamic banking sector in Bangladesh has been continuously growing at a
rapid pace which is reflected by the increasing branch network of Islamic Banks and the
conventional banks having Islamic banking branches. Some other conventional banks had
applied to convert their whole operations in line with the Islamic Sharia'h. Islamic Banking
Industry in Bangladesh has been highly contributing to encourage economic growth and
generate employment in the country to fulfill the vision of the government to reach the country
at a Middle Income Level by the year 2021.Thereby, this banking industry with more than 23%
market share and 29,176 employees have been playing a very dominant role in mobilizing