Deposits drop but loans surge in Islamic banks


Staff Reporter :

Shariah-based banks in the country witnessed a significant increase in loan disbursement despite a sharp drop in deposit collection in December and January. In January alone, deposits in these banks declined by Tk8,832 crore, reaching Tk375,304 crore, while loan disbursements increased by Tk3,642 crore, reaching Tk449,073 crore.

In December 2023, deposits slightly increased by Tk3,447 crore while loan disbursement soared by Tk7,224 crore, according to a Bangladesh Bank report titled “Islamic Banking and Finance Statistics.”

On the other hand, deposit growth in the overall banking sector surpassed 10 percent in December and January, reaching a 28-month high of 11.04 percent in December 2023 and 10.57 percent in January 2024.

Market insiders identified several reasons for the deposit decline in Islamic banks, including a loss of depositor confidence following reports of various loan irregularities in some Islamic banks, as well as high inflation and economic headwinds.
Among the 10 full-fledged Islamic banks in Bangladesh operating with 1,670 branches, five banks collectively had a negative balance of nearly Tk14,224 crore in their current accounts with the central bank as of April 24, according to Bangladesh Bank data. Despite having no money in their current accounts, these banks are still conducting transactions, surviving only with crucial support from the central bank.


Ignoring the dire situation, these banks continued lending activities, raising questions about the central bank’s monitoring. However, some Shariah-based banks have emerged as the weakest banks, based on four factors: classified loans, capital adequacy, loan-deposit ratio, and provisioning or security reserves.

Additionally, the market share of Shariah-based banks in overall deposits in the country’s banking system dropped to 23.56 percent at the end of January 2024 from 23.86 percent in December 2023. Conversely, the Islamic banks’ market share in investments, known as loans and advances in traditional banking, increased to 24.92 percent in January from 24.81 percent a month earlier.

Of the total deposits, full-fledged Islamic banks held Tk375,304 crore, Islamic banking branches of conventional banks held Tk23,270 crore, and Islamic banking windows of conventional banks held the remaining Tk15,394 crore.
The 10 full-fledged Islamic banks in Bangladesh are Al Arafah Islami Bank, Islami Bank Bangladesh PLC, Social Islami Bank, Standard Bank, Exim Bank, First Security Islami Bank, Shahjalal Islami Bank, Union Bank, Global Islami Bank, and ICB Islamic Bank.

At the end of December 2023, the country’s Islamic banks represented a 26 percent share in terms of deposits, 29 percent in investments, and 27 percent, 25 percent, and 38 percent in export, import, and remittance business, respectively, within the banking industry.