Islamic Banking Basics in Bangladesh: Principles, Products & Differences (2026)

By Abdul Latif · Educational content · Updated 2026

Islamic banking is widely used in Bangladesh by individuals and businesses who prefer financial services that follow Shariah principles. However, many people use Islamic banking products without fully understanding how they work.

Simple idea: Islamic banking avoids interest (riba) and instead uses profit-sharing, trade-based, or lease-based structures.

What Is Islamic Banking?

Islamic banking is a financial system that operates according to Islamic law (Shariah). Instead of earning money from interest, banks earn profit through permissible business activities.

Core Principles of Islamic Banking

No interest (Riba) – fixed interest on money is prohibited
Risk sharing – profit and loss are shared between bank and customer
Asset-backed transactions – financing must be linked to real assets or services
No uncertainty (Gharar) – contracts must be clear and transparent
Ethical investment – prohibited sectors are avoided

Islamic Banking vs Conventional Banking

Topic	Islamic Banking	Conventional Banking
Return method	Profit-based	Interest-based
Risk sharing	Shared between bank & customer	Mostly borrower bears risk
Underlying asset	Required	Not required
Ethical restrictions	Strict (Shariah compliant)	No religious restriction

Common Islamic Banking Products in Bangladesh

1) Mudaraba Savings Account

Customers deposit money, and the bank invests it in Shariah-compliant activities. Profit is shared based on agreed ratios.

2) Mudaraba Fixed Deposit (MTDR)

Similar to FDR, but returns are based on profit sharing instead of fixed interest.

3) Murabaha (Cost-plus Financing)

The bank buys an asset and sells it to the customer at a disclosed profit margin, payable in installments.

4) Ijara (Lease-based Financing)

The bank purchases an asset and leases it to the customer for a fixed rent.

5) Musharaka (Partnership)

Both bank and customer invest capital and share profit and loss based on agreement.

Is Islamic Banking Risk-Free?

No banking system is risk-free. Islamic banking reduces certain risks but still depends on:

Quality of bank management
Transparency of profit calculation
Overall economic conditions

Profit is not guaranteed. Returns can vary depending on bank performance.

Who Should Consider Islamic Banking?

People who want Shariah-compliant financial services
Customers preferring asset-backed financing
Long-term conservative savers
Businesses avoiding interest-based loans

Common Misunderstandings

“Profit is guaranteed” — not always true
“Islamic banking has no fees” — fees may still exist
“It’s only for Muslims” — anyone can use Islamic banking

Frequently Asked Questions (FAQ)

Is Islamic banking legal in Bangladesh?

Yes. Islamic banks operate under Bangladesh Bank regulations with Shariah supervision.

Is profit higher than interest?

It depends on bank performance and policy. Compare net returns, not labels.

Can non-Muslims use Islamic banking?

Yes. Islamic banking services are open to everyone.

Is Islamic banking safer than conventional banking?

Safety depends on bank governance and risk management, not only on the banking model.