Financial experts and regulators have emphasized that Shariah governance in Bangladesh’s Islamic banks must transition from mere “paperwork” to effective, practical implementation. They called for independent boards of directors, robust audit systems, and enhanced transparency to ensure the integrity of the Islamic financial sector.
These observations were made on Monday at a seminar titled “Shariah Governance in Islamic Banks of Bangladesh: An Evaluation,” jointly organized by the Bangladesh Institute of Bank Management (BIBM) and Malaysia’s INCEIF University at BIBM’s auditorium in Mirpur.
Moving Beyond Structural Formalities
Presiding over the event, BIBM Director General Dr. Md. Ezazul Islam stated that the challenge is no longer about establishing a Shariah framework, but ensuring it actually functions. He advocated for a shift toward “real effectiveness” over “formal compliance.”
“We need practical reforms, including independent and skilled boards of directors and the synchronization of corporate governance with Shariah principles,” Dr. Islam said.
He highlighted several critical areas for improvement:
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Implementing the “Three Lines of Defense” model for Shariah compliance.
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Ensuring the independence of internal Shariah audits.
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Introducing external Shariah reviews and fiduciary ratings.
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Raising the qualification standards for Shariah Supervisory Committee members.
Addressing Risks and Customer Awareness
Mosleh Uddin Ahmed, Managing Director of Shahjalal Islami Bank, pointed out that risk management must be a priority to strengthen the sector. He also noted a significant gap in public understanding, stating that many customers still lack a clear grasp of Islamic banking operations. He urged banks to present Shariah principles and benefits more simply to the public.
Adding a critical perspective on credit risk, Abdul Awal Sarker, Director of Janata Bank and former Executive Director of Bangladesh Bank, noted that data concealment during the investment (loan) process often leads to high default rates.
“Ethics and personal integrity are the backbones of Islamic banking. If the individuals involved are not honest, Shariah compliance will inevitably fail,” Sarker remarked. He proposed appointing Resident Shariah Scholars in every bank to provide constant oversight and called for stricter monitoring by the central bank.
Transparency and Accountability Gaps
The seminar also touched upon technical weaknesses in reporting. Nabil Ahmed, Executive Director of the Financial Reporting Council (FRC), observed that internal audit reports in many Islamic banks are not being prepared or presented properly. He stressed that high-quality, regular auditing is essential for maintaining transparency and accountability.
Key Participants: The seminar featured insights from international and local experts, including Dr. Said Bouheraoua, Director of the ISRA Institute (Malaysia), Muhammad Anisur Rahman, Director of the Islamic Banking Regulations and Policy Department at Bangladesh Bank, and Dr. Md. Mahabbat Hossain, Associate Professor at BIBM, who presented the keynote paper.
The consensus among speakers was clear: Shariah governance must become a cultural pillar within the banking industry, driven by a coordinated effort between regulators, Shariah experts, and top management.
