IFSB and BB Spearhead Discussions on the Prospects and Challenges in the Development of Islamic Finance for Bangladesh
Date posted: 26 September 2013
26 September 2013, Dhaka – The Islamic Financial Services Board (IFSB) and Bangladesh Bank has successfully organized a “Seminar on Prospects and Challenges in the Development of Islamic Finance for Bangladesh" on 23 and 24 September 2013 in Dhaka. This Seminar is part of the IFSB Seminar on Islamic Finance series which are held in jurisdictions wishing to explore the prospects, opportunities and best practices of Islamic finance. It aimed to create greater awareness on the latest developments on the Islamic financial services industry, and to discuss the issues in further augmenting its role in Bangladesh.
Bangladesh Bank's Governor H.E. Dr. Atiur Rahman, in his Keynote Address, highlighted the role that Islamic finance can play in the development of the emerging markets. He stated that "With its ethical, inclusivity promoting and stability enhancing attributes, Islamic finance undoubtedly bears promise of playing a major beneficial role in our socioeconomic development". He emphasised that the inclusive nature of Islamic banking is evidenced in its growth and is already significant engagement in the agriculture, SME and microfinance sectors in Bangladesh. He also outlined the usefulness of Sukūk for "financing of Bangladesh's much needed infrastructure projects". On the regulatory framework for Islamic banks, the Governor cited the close cooperation between the central bank and market participants, which has resulted in developing a fairly comprehensive set of the guidelines and regulations. He also applauded the "standards developed by the IFSB on various aspects of Islamic finance that have been crucially helpful" in strengthening the regulatory framework.
In his Special Address, the Minister of Finance of Bangladesh, inspired the audience by providing his personal insights into the inclusive nature of Islamic finance and the role it can play to take the masses out of poverty. He outlined that in order to achieve the higher aims of society, a collective effort by various players is necessary. He stated that regulators should provide due support and level playing field to Islamic financial institutions as they serve to achieve the socioeconomic objectives of the society.
Referring to the contribution of Islamic finance to global growth and stability, Mr. Jaseem Ahmed, the Secretary-General of the IFSB outlined in his Opening Address that Islamic finance contributes directly to real sector growth and widens consumer choice. He illuminated the role Islamic finance can play as a means for financing of physical and social infrastructure that supports economic development and job creation, most importantly through Sukūk. For this reason, he reiterated, integrating Islamic finance into public spending and public financing programmes will be helpful. On the regulatory framework, Mr. Ahmed pointed out that a collaborative effort between the supervisory authority, policy-makers and market players is key to maintaining the balance between strong regulation and the market’s ability to grow.
The first session of the Seminar saw a distinguished panel of speakers providing insights into the growth achieved and challenges faced by the industry at global and regional in the past decades. This session gave an overview of cross-border regulation in various jurisdictions, which can suggest some important lessons for Bangladesh.
The participants of the Seminar were further enlightened by the speakers on the recent developments taking place the Islamic capital market sector in the next session, including the issuance of Sukūk. Speakers shared their experiences on how the Islamic capital market can help boost the economy of Bangladesh via various incentive structures. A robust Islamic capital market will also encourage the corporate and private sector to have an alternative source of funding in the form of Sukūk.
The third session guided the participants to the experiences of various jurisdictions, including Malaysia, in coming up with a comprehensive set of legal, regulatory and enabling framework. Bangladesh can easily relate to Malaysia since both countries initiated Islamic finance in the early eighties. The speakers outlined the need to have strategic vision and clear direction for the industry in the medium to long term.
Financial inclusion was the theme of the fourth session of the Seminar. Speakers from diversified backgrounds shared their experiences on the subject in various jurisdictions in which three types of microfinance services are notable: microfinance through banking services, microfinance through Qard loans and microfinance through Takāful products. Many countries in the South and South East Asia as well as Africa have shown full stride in including the poor into their financial systems.
This engaging Seminar came to a close in the fifth session where a panel of speakers from a wide variety of backgrounds - including academics and representatives of public and private sector - shared their views on how Bangladesh can move forward in strengthening its niche in Islamic finance. Bangladesh’s Islamic financial market is urged to draw a clear roadmap and direction for the future which include steps such as: the availability of a robust legal, regulatory and Sharī`ah governance framework; cooperation between stakeholders; human development programmes, as well as support from government.
Mr. Ahmed and Mr. Abu Hena Mohd. Razee Hassan, the Deputy Governor of Bangladesh Bank drew a close to the one and a half day Seminar by sharing their visions for the Islamic financial system in Bangladesh. With Islamic finance as a means to financial inclusion at the heart of the points raised by the Governor and Minister of Finance of Bangladesh, the IFSB assured Bangladesh Bank of its constant support for the various initiatives to strengthen the Islamic finance in its member countries, in line with the IFSB’s mandate to facilitate the sound and stable development of the global Islamic financial services industry. Bangladesh Bank has been Full and Council Member of the IFSB since 2004.
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