IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 20, Issue 3. Ver. VIII (March. 2018), PP 10-20 www.iosrjournals.org DOI: 10.9790/487X-2003081020 www.iosrjournals.org 10 | Page Growth and Prospect of Islamic Finance in Bangladesh Md. Moniruzzaman 1 Senior Lecturer, Department of Business Administration, Stamford University Bangladesh Abstract: Though Conventional Financial system is contributing swiftly to the Economic development but the Islamic Finance is not lacking behind of it now a days. The Islamic Finance Industry has emerged as one of the component of a rapid economic growth over the past three decades. Initially the activities of Islamic Finance is limited within the country, but at present the growth of Islamic Finance are thought globally with an upward trend through the establishment of various Islamic financial institutions with different shareholders. This paper examines insights into the growth and prospect of Islamic finance in Bangladesh. Islamic Finance is ruled by Islamic Finance Guidelines which is issued and approved by Central Bank of Bangladesh. This system has its own principles and guidelines which would make the system of choice in meeting specific investment needs. It compares Islamic and conventional finance regard to Efficiency and Profitability, Risk Management, and Sukuk and Conventional Bonds. In Bangladesh, the atmosphere is exclusive because of the existence of Islamic Banking sector. But the country has some deficiencies in imposing specific Islamic Finance regulations which have been recognized and efforts are being made to solve the problems by the authorities. JEL Code: E58, F65, G21, G28 Keyword: Islamic finance, Growth, Prospect, Bangladesh. --------------------------------------------------------------------------------------------------------------------------------------- Date of Submission: 08-03-2018 Date of acceptance: 24-03-2018 ------------------------------------------------------------------------------------------------------------------------------------- I. Introduction Islamic finance is ruled by the shariah (Islamic law). It is obtained From the Holy Quran and the Sunnah, which are followed by the consensus of the jurists and interpreters of Islamic law. The Islamic mode of finance should emphasize profit and loss sharing and prohibit interest according to Shariah. From The Islamic point of view, any fixed payment above the actual amount of the principal (i.e. interest) is illegal. Uncertainty, risk and speculation related activities are banned by the Shariah. Investment those businesses which are dealing with alcohol, drugs and gambling, and also considered unlawful or undesirable also included in this prohibition (Grail, 2007). Islamic financial system should be followed by Islamic rules and regulations, not for the name and label only, but also it must maintain the philosophy, values, ethics and objectives of Islamic shariah. In Bangladesh, the growth of the Islamic finance industry has been recognized through the originations of the international financial services industry. The regular development of the Islamic finance industry is modest retail offerings, sophisticated corporate banking products, pioneering project finance solutions and commercial banking. Islamic finance has started its journey with simple banking solutions that encourage savings and financing in 1970. The products were designed with Shariah principles and guidelines and easily understood by the public. In 1980, new financial products such as project finance and syndications were inaugurated. After 10 years, Ijarah and equity were included. Finally in 2000, sukuk, formed and alternative assets, liquidity and management tools also were implemented. Now a days, the growth and potentiality of Islamic finance is dynamic and it is considered as a competitive substitute of conventional financing solutions in Bangladesh. There are so many diverse local and foreign players are available in the market, who are constantly showing their dynamism with a wide array of innovative financial products and services. Islamic banking is comprised of 30% of the total banking sector. So it can be said that there is a huge potentiality and scope of practicing Islamic finance in Bangladesh. II. Principles and products of Islamic Finance The basic principles of Islamic finance include profit and risk sharing and it is free from interest. It also adds transparency and full disclosure, good governance, value-based innovation and principles of justice. The dominant principles regarding Islamic finance are the following: 1. Any fixed or predetermined payment above the principal amount is prohibited. 2. Islamic finance entails that all banking business based on sale or lease must have an underlying asset. 3. Profit and loss sharing concept. Investors must receive the profit and obey the loss as well.