Islamic banks’ deposits rise, but market share falls

Deposits in Islamic banks saw a moderate increase in June 2025, but their share in the banking sector fell by 1.17 percentage points year-on-year, according to Bangladesh Bank data.

Deposits in the Shariah-based banks grew by 2.67 percent year-on-year, reaching Tk 4.52 lakh crore in June 2025, according to the central bank's Islamic Banking and Finance Statistics (IBFS) report for June 2025 released on Tuesday. "This indicates a slower pace of growth compared to the conventional banking sector."

Besides their share of total banking deposits dropped from 23.54 percent in June 2024 to 22.37 percent in June whilst for conventional banks this figure recorded contrarily, the BB noted.

The total banking system deposits increased by 8.04 percent to Tk 20.22 lakh crore during the period.

The BB report said governance issues in some Islamic banks, which came to light after the July uprising, eroded public confidence and prompted depositors to shift funds away from these lenders to conventional ones.

Conventional banks posted stronger gains, with deposits rising from Tk 14.31 lakh crore to Tk 15.69 lakh crore over the same period, a jump of 9.69 percent.

The conventional lenders are capturing a larger share of new deposits thanks to stronger governance, wider branch networks, and more attractive deposit products compared to Islamic banks, the BB report noted.

A similar trend, though on a smaller scale, was observed in the non-bank financial institution (NBFI) sector. Total deposits there stood at around Tk 51.8 thousand crore in June 2025, nearly 1 percent higher than in May 2025.

Islamic NBFIs, however, logged 2.45 percent growth during the same period, taking their deposits to Tk 3,800 crore.

The Sharial-compliant NBFIs accounted for 7.23 percent of total NBFI deposits in June 2025, a relatively small portion compared to their conventional counterparts.

Among them, full-fledged Islamic NBFIs captured only 33 percent of the share, while the rest was held by Islamic branches or windows of conventional NBFIs.

Mudaraba deposits dominated the Islamic NBFI segment, making up about 99.22 percent of all deposits.

The private sector contributed the largest share to these deposits in June 2025, the report added.