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Bangladesh’s Islamic banking sector staged a strong comeback in November 2025, driven by a sharp rise in inward remittances and steady growth in Shariah-compliant investments, signalling a gradual return of depositor confidence.

According to Bangladesh Bank data, investments in the Islamic banking system jumped 12.86 per cent year-on-year to Tk 5.89 trillion in November, up from Tk 5.21 trillion a year earlier. Total assets also expanded 12.59 per cent to Tk 9.84 trillion from Tk 8.74 trillion.

In comparison, overall investments in the conventional banking system grew 10.60 per cent to Tk 17.78 trillion, indicating that Shariah-based lenders slightly outperformed their conventional peers. The Islamic sector now accounts for about one-fourth of total banking investments in the country.

The standout feature of the November performance was the strong rebound in remittances. Inflows through Islamic banks surged to $740 million, up from $472 million in the same month last year.

A senior central bank official said the sharp increase reflects renewed trust among expatriate workers, supported by improved management practices and tighter regulatory oversight.

Trade-related activities, however, remained subdued. Export proceeds routed through Islamic banks slipped 4.41 per cent to $668 million, while import payments edged down 1.90 per cent to $1.04 billion, suggesting stability rather than expansion in trade finance.

Islamic banks continued to dominate agent banking, reinforcing their role in financial inclusion. They accounted for 54.58 per cent of total agent banking deposits, which rose 22.67 per cent year-on-year to Tk 261 billion. Full-fledged Islamic banks sanctioned 91 per cent of all Islamic investments, with conventional banks’ Islamic branches and windows contributing the remaining 9 per cent.

Dr Masrur Reaz, chairman of Policy Exchange Bangladesh, said the November figures point to a measured but meaningful recovery.

“The rebound in remittance inflows is particularly significant, as remittances are fundamentally trust-based. This suggests that governance reforms and closer regulatory oversight are beginning to restore confidence among expatriate workers,” he said.

He added that double-digit growth in investments and assets reflects rising demand for Shariah-compliant financing, especially in rural and semi-urban areas, where agent banking has become a key strength.

However, he cautioned that sustaining the momentum will require deeper structural reforms. “The sector must focus on risk management, product innovation and greater transparency. Without diversification of Shariah-compliant instruments and stronger corporate governance, the gains may remain cyclical,” he said, noting that the weak performance in trade finance underscores the need to strengthen export-import financing capacity.