Bangladesh Bank Reaffirms Shariah Board Independence

The Bangladesh Bank has pledged to safeguard the independence and operational autonomy of Shariah supervisory boards as part of a wider initiative to strengthen governance standards within the country’s Islamic banking sector.

The assurance was given by Governor Dr. Md. Mostafizur Rahman during a high-level consultative meeting held at the central bank’s headquarters, themed “Current State, Challenges and Future Directions of Islamic Banking”.

In his address, the Governor urged Shariah board members to carry out their responsibilities without fear, pressure, or external interference. He emphasised that the central bank would provide full institutional backing to ensure their independence, enabling stricter enforcement of Shariah compliance across Islamic financial institutions.

Governance reforms in Islamic banking

The Governor acknowledged that past weaknesses in regulatory oversight had contributed to irregularities in parts of the Islamic banking sector, including allegations of financial misconduct and money laundering. However, he stressed that Islamic banking—when properly regulated and based on its asset-backed financing structure—generally carries lower systemic risk than conventional banking systems.

He added that strengthening governance mechanisms and empowering Shariah supervisory boards would be central to restoring public trust in the sector.

Islamic banking in Bangladesh operates on Shariah principles that prohibit interest (riba) and promote ethical, asset-backed, and risk-sharing financial transactions. Shariah boards therefore play a critical role in ensuring that banking products and operations comply with Islamic jurisprudence.

Key reform proposals discussed

The meeting brought together Islamic scholars, financial experts, academics, and senior banking officials, who collectively outlined a range of reform proposals aimed at improving transparency, accountability, and institutional resilience.

Key recommendations

Participants emphasised that restoring depositor confidence would depend heavily on visible enforcement actions against malpractice, particularly in cases involving large-scale financial irregularities. They also called for a standardised compliance assessment framework to ensure consistent monitoring of Shariah adherence across the sector.

Ambition to become regional hub

Looking ahead, policymakers and experts expressed optimism about Bangladesh’s potential to develop into a regional centre for Islamic finance. Suggestions included the establishment of specialised research institutes and dedicated libraries to support academic and professional development in Islamic banking.

Some participants also proposed a gradual transition of conventional banks into Shariah-compliant models, arguing that such a shift could align the financial sector with growing demand for ethical and faith-based banking services.

Safeguarding institutional independence

In his concluding remarks, Governor Dr. Md. Mostafizur Rahman reiterated the importance of insulating Islamic financial institutions and their supervisory structures from political and corporate influence. He urged all stakeholders to prioritise transparency, accountability, and service-oriented governance in order to strengthen public confidence.

He reaffirmed the central bank’s commitment to building a stable, credible, and well-regulated Islamic banking ecosystem in Bangladesh.

Outlook for the sector

The meeting concluded with renewed commitments from Bangladesh Bank and participating stakeholders to enhance regulatory oversight and institutional independence. Senior officials of the central bank, along with members of Shariah supervisory boards from various Islamic banks, attended the session.

As Bangladesh’s financial sector continues to expand, experts believe that stronger governance frameworks, enhanced Shariah compliance, and improved regulatory independence will play a decisive role in ensuring long-term stability and international competitiveness.