Islami Bank Surpasses Sonali Bank as Largest Lender by Deposits

Islami Bank Bangladesh PLC has reached a remarkable milestone by becoming the largest lender in the country by total deposits, overtaking Sonali Bank PLC for the first time. In 2023, this Shariah-compliant bank attracted deposits totaling Tk 153,456 crore, showcasing an impressive 9% year-on-year growth. This accomplishment positions Islami Bank as a dominant force in the Bangladeshi banking sector, particularly in the domain of ethical and Shariah-compliant banking, highlighting its commitment to providing interest-free, transparent, and fair financial services.

Growth in Deposits, Largest Lender

Islami Bank’s rise to the top can be attributed to several factors. The bank’s focus on ethical finance and compliance with Shariah principles has garnered trust among depositors seeking interest-free banking options. According to Toufic Ahmad Choudhury, director-general of the Bangladesh Academy for Securities Markets, religious factors significantly contribute to the bank’s ability to attract deposits. Furthermore, limited safe investment opportunities have led many to prefer bank deposits over riskier investments like real estate.

Comparative Performance

In contrast, Sonali Bank, the largest state-run lender, saw a 6% increase in deposits, reaching Tk 150,606 crore. Despite its extensive network of 1,232 branches, Sonali Bank’s growth in deposits has been slower compared to Islami Bank, which operates 394 branches. Private banks, leveraging new technologies and expanding their services through agent banking and mobile financial services, are also rapidly gaining ground.

Challenges and Resilience

Islami Bank has faced its share of challenges, particularly following its takeover by S Alam Group in 2017, which saw a series of financial irregularities and scams. Notably, the bank was implicated in disbursing Tk 7,246 crore in loans to nine companies in 2022, violating banking norms. Despite these setbacks, the bank has managed to maintain and even grow its depositor base, highlighting the strength of its ethical banking model.

Industry Trends

The broader trend in Bangladesh’s banking sector shows a growing preference for ethical and Shariah-compliant financial products. Private banks are increasingly adopting digital solutions to enhance customer experience and expand their reach. For instance, Standard Chartered Bangladesh, a foreign bank, raised Tk 41,940 crore in deposits, marking a 15% increase year-on-year. This underscores the competitive landscape and the rising demand for diverse banking solutions​ (Global Ethical Finance).

Financial Performance

While Islami Bank leads in deposits and lending, it lags in profitability compared to other major banks. Standard Chartered Bangladesh posted the highest profit in 2023, netting Tk 2,335 crore, followed by HSBC with Tk 999 crore. Islami Bank’s focus on ethical finance and lower interest rates may contribute to its lower profitability but also reinforce its commitment to Shariah principles​.

Islami Bank’s rise to becoming the largest lender in Bangladesh by deposits highlights a significant shift in the nation’s banking preferences towards ethical and Shariah-compliant finance. This success, despite various challenges, underscores the growing demand for financial solutions that align with customers’ religious and ethical values. As the banking landscape continues to evolve, Islami Bank stands out as a key player, setting new standards for ethical property finance and contributing to a more inclusive and responsible financial future in Bangladesh.