Regulation and performance of Islamic banking in Bangladesh

Abstract

This article examines current legal and regulatory issues of Islamic banking in Bangladesh. The most important issue in this context is the lack of a well‐defined regulatory and supervisory framework for Islamic banks for their effective functioning in line with the tenets of Shariah. Other major issues come from the absence of an interbank Islamic money market, following the same policy and guidelines for Islamic and conventional banking by the Bangladesh Bank, presence of a discriminatory legal reserve requirement for Islamic and conventional banking, prevalence of a restrictive environment in the capital market, and the lack of legal support and protection of Bangladesh Bank to avoid the associated risks of Islamic banks. For this purpose, it is suggested that Islamic banks in Bangladesh should have an independent banking act that controls, guides, and supervises their functions and provide legal support to the parties concerned. © 2007 Wiley Periodicals, Inc.

Analyzing the Impact of Banking laws and Legislations on the Converting of Conventional Banks into Islamic in Libya

“…Additionally, Ahmad and Hassan (2007) found that a well-defined supervisory framework and regulatory regime plays an influential role in the effective functioning of Islamic banking. At the minimum level, a conventional bank that wishes to convert into Islamic form needs to consider if a basic regulatory and accounting framework has been established in the nation.…”

“…In particular, external intervention in organisational transformation may interact with internal environment factors, and weaken or reinforce its impact on transformation. Although some studies have examined the impact of regulation on performance in the Islamic banking sector (Ahmad and Hassan, 2007;Tsikouras, 2009;Zaher and Hassan, 2001), there is relatively little knowledge regarding the combined effect of external and internal environment factors on organisational transformation, with an emphasis on converting conventional retail banking into Islamic lines. Therefore, this paper proposes hypotheses on the moderating effect of banking law and regulation on the relationship between successful transformation and determining variables, namely competent human resources, relevant experiences, willingness, and Islamic capital market.…”

“…Supportive government regulations, in particular, can create competitive advantage by improving performance standards and driving market demands (Porter, 1990). The absence or lack of regulatory supports may result in negative consequences for organisations in running their operations effectively (Ahmad and Hassan, 2007).…”

“…The supervisory regimes vary in each country. The main purpose of banking regulation is to maintain the integrity of the financial system (Ahmad and Hassan, 2007; Khan and Bhatti, 2008;Zaher and Hassan, 2001). A growing number of conventional financial institutions in the Middle Eastern countries are gradually but noticeably converting their operations to Islamic basis (Khan and Bhatti, 2008).…”

Determinant of customers’ preference in selecting Islamic banks

“…For the past few decades, Islamic banking had grown very well due to the increasing demand of better service quality and the need to improve. Customer have knowledge and they know what they are capable of, thus pushed Islamic banking to flourish and overcome conventional banking (Ahmad and Hassan, 2007). With the growth rate of 25-20 % annually, Islamic banking shows great potential to surpass conventional † Sharia is the religious law governing the members of the Islamic faith.…”