Islamic banks: Loans surge, deposits lag

The amount of loans disbursed and money invested by the country’s Shariah-based banks was way higher than the deposits they collected by the end of June this year, said sources.

According to the Bangladesh Bank data, deposits in the Shariah-based banks collectively reached around Tk4.40 lakh crore as of 30 June this year, while these banks’ investments stood at around Tk5.13 lakh crore at that time.

That means their investment was Tk73,307 crore higher than their deposits.

At the end of December 2023, the total amount of deposits at the Islamic banks was about Tk4.22 lakh crore, while their investment was almost Tk4.77 lakh crore.

In the first six months of this year, deposits at the Shariah-based banks increased by around Tk17,963 crore, but their investments increased by more than double that amount – Tk36,278 crore.

Deposits in the Islamic banking sector have been rising, but they were still facing a persistent liquidity crunch for months due to their increasing loan disbursement and investments, said sources.

Due to various irregularities in some of the Islamic banks, the customers’ confidence in them dipped since December 2022. Consequently, a heightened trend of withdrawing money by these banks’ customers resulted in lower deposits at these banks compared to their investments, said people involved in this sector.

Asked about the faster rate of loan disbursement than that of collecting deposits, the officials of several Shariah-based banks said eight banks were in the clutches of S Alam Group for a long time. Six of those banks were Shariah-based. Aside from these banks’ deposits, the plundering business group was also siphoning their capitals, security reserves, and the money borrowed from the Bangladesh Bank.

Currently, some of these banks’ accounts show large deficits. However, the Bangladesh Bank was always helping the banks that were faltering instead of taking any action against them, said sector insiders.

After the fall of the fascist government headed by Sheikh Hasina last month, eminent economist Ahsan H Mansur was appointed as the governor of Bangladesh Bank, replacing Abdur Rouf Talukder.

Then the central bank reconstructed all of the eight banks that were either partially or fully controlled by S Alam, freeing them from the grip of the controversial business group.

The Bangladesh Bank restructured the boards of Islami Bank Bangladesh, First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and Bangladesh Commerce Bank, which were fully controlled by S Alam.  Boards of National Bank and Al Arafah Islami Bank, partially controlled by S Alam, were also reconstructed.

Bangladesh Bank Governor Ahsan H Mansur said, “S Alam looted whatever there was to loot. We now have to rescue the banks from this shattered condition.”

According to Bangladesh Bank, there are ten full-fledged Islamic banks operating in Bangladesh. These are: Islami Bank, Al Arafah Islami Bank, Social Islami Bank, Standard Bank, Export lmport Bank of Bangladesh Limited (EXBL), First Security, Shahjalal Islami Bank, Union Bank, Global Islami Bank, and ICB Islamic Bank.

Conventional banks are now also opening Islamic banking branches and windows due to public demand. Currently, 16 conventional commercial banks are providing Shariah-based banking services through 33 Islamic banking branches and 11 conventional commercial banks are providing Islamic banking services through 534 Islamic banking windows along with conventional banking services.

Shariah-based banks’ deposits, investments rising At the end of June this year, the total deposits in the Islamic banks reached Tk4,40,427 crore. In May and April their deposits were Tk4,28,802 crore and Tk4,24,601 crore  respectively.

The deposits in the Shariah-based banks in March, February, and January were Tk4,19,299 crore, Tk4,18,914 crore and Tk4,13,969 crore, respectively.

Among different types of deposits of the Islamic banking system, Mudaraba Deposits accounted for 85.51%.

At the end of June, the total investment of the Islamic banks stood at Tk5,13,734 crore. In May and April it was Tk5,04,113 crore and Tk4,98,098 crore respectively.

The amount of investments in Shariah-based banks in March, February, and January was Tk4,93,578 crore, Tk4,88,901 crore and Tk4,82,325 crore, respectively.