In a Nutshell:
- Finance Minister Amir Khosru Mahmud Chowdhury told parliament that Bangladesh Bank is introducing a dual banking system, offering customers conventional and Shariah-based Islamic banking options.
- The government is also seeking closer integration with international Islamic-finance networks.
- Bangladesh had 1,699 full-fledged Islamic-bank branches as of 30 June 2026: 1,074 in urban areas and 625 in rural areas.
- Conventional banks operate 75 Islamic branches and 1,102 Islamic-banking windows; two more conventional banks have been approved for Islamic banking operations.
- Sammilito Islami Bank PLC has 761 branches, including branch networks previously linked to five Islamic banks.
Context
A dual banking system generally refers to a financial structure in which conventional interest-based banking and Islamic banking operate side by side under the same national regulatory framework. Islamic banking is designed around Shariah principles, including restrictions on interest-based lending and investment in certain prohibited activities; instead, it relies on structures such as profit-and-loss sharing, trade financing, leasing, and asset-backed transactions. Bangladesh has effectively operated a mixed system for years, with both full-fledged Islamic banks and Islamic branches or windows of conventional banks already serving customers.
Why it matters
The move can broaden formal access to banking for people and businesses that prefer Shariah-compliant financial services, while retaining conventional options for other customers. With 1,699 full-fledged Islamic branches and more than 1,100 Islamic windows in conventional banks, Bangladesh already has an extensive delivery network for such services. However, the policy’s value will depend on credible banking supervision, transparent governance and sound asset quality.
What we think
Bangladesh Bank can set common rules on Shariah governance, fund segregation, disclosures, capital, liquidity and customer complaint mechanisms for both Islamic banks and Islamic windows in conventional banks. This is especially relevant because 35 conventional banks already provide Islamic services through branches and windows. The broader aim is a system in which customers receive real choice, clear information, and equal protection regardless of whether they use conventional or Islamic banking. A dual system can diversify financial services, but it does not automatically resolve weak loans, liquidity pressures or governance failures within banks.