Journal of Islamic Banking and Finance Vol. 2, No. 1; March 2014 23 © American Research Institute for Policy Development www.aripd.org/jibf Islamic Banking Scenario of Bangladesh Salahuddin Yousuf 1 Md. Ariful Islam 2 Md. Rayhan Islam 1 Abstract With an aim to explore the current Islamic banking scenario of Bangladesh, this study examines the key concepts of Islamic banking and its history in the world and in Bangladesh as well. This secondary data based research meets its objectives of reviewing relevant concepts, history and current performance of the Islamic banks of Bangladesh through both qualitative and quantitative approaches. From the establishment of first Islamic bank in 1983, this country has currently eight Islamic banks. Except one individual bank (ICBIBL), most of the Islamic banks show remarkable growth in their profitability in the last decade. One reason behind this consistent negative figure in profitability of this bank is the frequent change of ownership. But overall significant contribution of the Islamic banks in the banking industry is visible from the research. This paper provides up-to-date scenario of the Islamic banking in Bangladesh. Keywords: Islamic Banking, Riba, Performance, Banking Industry JEL-classification: E44 G10 G21 1. Introduction Islamic banking and finance is a creation of modern age. Capitalism argues, capital- one of the key factors of production, deserves fixed return whereas the entrepreneurs have to bear all the risks. The conflict of opinions with the Islamic values starts from this very basic point. As the conventional banking systems follow the philosophy of capitalism and interest which is forbidden according to Islamic Shariah, the Muslims made the first move toward the Islamic financial system was observed in the second half of 20 th century when the Muslim world got liberation from colonial powers (Hanif, 2011). Conference of Foreign Ministers of Muslim countries (1973) can be marked as a landmark of the growth and popularity of Islamic Financial Institutions (IFIs). Soon after this conference, Bangladesh signed the Charter of Islamic Development Bank n August 1974. Analyzing the demand and feasibility of Islamic banking, Islami Bank Bangladesh Limited, the first Islamic bank of Bangladesh was established in March 1983 3 . Currently eight Shariah based Islamic banks are operating in Bangladesh with their significant contributions to the banking industry and to the financial system of the country as well. 1 MBA Student, Khulna University, Khulna, Bangladesh 2 MBA Student, BASIC Bank Limited, Khulna Branch, Bangladesh 3 Source: Islami Bank Bangladesh Limited official website, February 4, 2014