The Bangladesh Bank has reaffirmed its commitment to safeguarding the independence and functioning of Shariah supervisory boards, as part of a wider initiative to reinforce governance across the Islamic banking sector. The assurance was articulated by Governor Dr. Md. Mostafizur Rahman during a high-level consultative meeting at the central bank’s headquarters.
Speaking at the session titled “Current State, Challenges and Future Directions of Islamic Banking”, the Governor urged Shariah board members to perform their duties independently, free from or undue influence. He emphasised that the central bank stands ready to provide full institutional protection, ensuring that these boards can enforce Shariah compliance rigorously and impartially across all Islamic financial institutions.
Reinforcing Governance in Islamic Finance
Highlighting past shortcomings, the Governor candidly acknowledged that insufficient oversight had, at times, enabled irregularities within certain banks, including allegations of financial misconduct and money laundering. However, he pointed out that Islamic banking—grounded in asset-backed financing and ethical investment principles—can offer greater resilience and reduced systemic risk when properly regulated and implemented.
He stressed that restoring public trust hinges on strengthening governance frameworks, noting that empowered and independent Shariah boards are central to ensuring transparency and accountability in the sector.
Islamic banking operates in accordance with principles derived from Islam, which prohibit interest (riba) and encourage risk-sharing, asset-backed transactions, and socially responsible investment. Within this framework, Shariah boards act as critical oversight bodies, ensuring that all banking activities adhere to religious and ethical standards.
Reform Proposals from Experts and Stakeholders
The meeting brought together leading scholars, Shariah specialists, academics, and senior banking officials, who collectively proposed a comprehensive set of reforms aimed at strengthening institutional integrity and operational transparency.
Key Recommendations Discussed
| Reform Area | Proposed Measures |
|---|---|
| Legal Framework | Enact a dedicated Islamic Banking Act to regulate the sector comprehensively |
| Regulatory Oversight | Appoint a Deputy Governor to supervise Islamic banking activities |
| Investment Approval | Require approval from multiple Shariah board members for large-scale investments |
| Board Independence | Ensure Shariah boards remain free from influence by bank directors |
| Capacity Building | Mandate minimum knowledge of Islamic finance for banking professionals |
| Audit & Compliance | Introduce external Shariah audits and transparent compliance evaluation systems |
| Anti-Corruption Measures | Enforce penalties for money laundering and major financial crimes |
| Liquidity Support | Provide liquidity facilities for financially distressed Islamic banks |
Participants emphasised that rebuilding depositor confidence will require enforcement actions against malpractice, particularly in cases involving financial irregularities. They also highlighted the importance of establishing a robust and transparent compliance assessment framework to monitor adherence to both regulatory and Shariah standards.
Aspirations for a Regional Islamic Finance Hub
Looking ahead, policymakers expressed optimism about Bangladesh’s potential to position itself as a leading hub for Islamic finance in the region. To support this vision, experts proposed the establishment of specialised research centres and resource-rich libraries dedicated to Islamic banking and finance.
Additionally, there were calls for a gradual transition of conventional banks towards Shariah-compliant models, aligning the broader financial system with the increasing demand for ethical and faith-based banking services.
Ensuring Institutional Integrity and Independence
In his concluding remarks, the Governor underscored the necessity of insulating Islamic banks and their supervisory bodies from political and corporate interference. He called on all stakeholders to work collaboratively to build service-oriented, transparent, and accountable financial institutions that prioritise public trust above all else.
The meeting concluded with a renewed commitment from Bangladesh Bank to develop a stable, credible, and well-regulated Islamic banking ecosystem. Senior officials of the central bank, along with members of Shariah boards from various Islamic banks, were present at the event.
As Bangladesh continues to expand its Islamic finance landscape, a sustained focus on governance, independence, and compliance is expected to play a decisive role in ensuring long-term sustainability and enhancing the country’s competitiveness in the global financial arena.