Diversification of Islamic Financial Instruments
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To summarize the overall recommendations for Islamic finance in Bangladesh:
It is recommended that the Bangladesh regulatory authorities like BB, BSEC, IDRA, MRA etc.,
should ensure that there are sound enabling environments for the development and operation
of Islamic money capital and takaful markets.
It is recommended that the Islamic banking legislative framework be bolstered by way of
enacting regulation like Islamic Banking Act, insurance sector with the Takaful Act rather than
just some provisions and guidelines.
It is recommended that initiatives should be taken by the appropriate authorities to
undertake the necessary comprehensive and detailed review of the Banking Companies Act,
1991, Financial Institutions Act 2003, Insurance Act 1938 and 2000 to update them, and also
ensure that they provide a sound foundation for Islamic banking, Islamic NBFIs, Takaful
companies and for Shariah compliance.
It is recommended that Bangladesh Bank’s Guidelines on Islamic Banking, Guidelines on Risk-
based Capital Adequacy (2014), and Guidelines on Internal Control & Compliance in Banks
(2016) contain the updated regulatory minimum capital adequacy requirements aligned to
Basel III, Risk Factors relating to Islamic modes of Investment, application of Shariah audit, and
that they list AAOIFI guidelines and the IFSB manual as policy documents to which banks must
adhere. Those standards and legal instruments of IFSB and AAOIFI must be made compulsory
to follow by the Islamic banks and Islamic NBFIs.
It is recommended that a National Shariah Supervisory Board be established at the central
bank to formulate necessary policies to guide and supervise the central bank authorities.
Alongside, Securities & Exchange Commission should also acquire necessary expertise to
frame policies to facilitate Islamic capital market with products and instruments and regulate
financial institutions engaged in capital market activities.
It is recommended that the Insurance Authority of Bangladesh (IDRA) should give its utmost
attention to devise appropriate rules and regulations for the Islamic takaful industry (both for
life and general takaful companies). They should clearly prescribe the Takaful models to be
followed by the Takaful companies. To follow up the activities of the Takaful companies, IDRA
must establish its own Takaful Department to monitor and supervise the activities of the
takaful companies. IDRA may also advise the Takaful operators to establish their apex training
and research academy to create necessary expertise for this sector.
It is recommended that to uphold the integrity of the financial 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 need for liquidity management for Islamic
banks and Takaful operators drove a number of countries such as Malaysia, Kuwait and
Bahrain to introduce Sukuk to facilitate management of assets by Islamic financial institutions.
Finally, we recommend that the government, along with the regulators of the financial sector
of Bangladesh, should undertake a comprehensive program to strengthen the overall
legislative, regulatory and supervisory framework. This is to ensure sound and stable Islamic
banking sector, Islamic NBFIs sector, Islamic Capital market and Islamic Takaful sector in the
country to achieve the goal of the country reaching income status in the year 2021. The