Islamic banking in Bangladesh continued to register solid year-on-year expansion at the end of 2025, though the most recent quarterly indicators reveal a noticeable slowdown in momentum amid weaker external trade performance, softer employment trends, and a more cautious lending environment.
According to Bangladesh Bank data, total deposits in the Islamic banking segment reached Tk 4.81 trillion at the end of December 2025. This represented a quarterly increase of Tk 108.76 billion, or 2.31 per cent, compared with Tk 4.70 trillion in September 2025. On a year-on-year basis, deposits rose by Tk 414.34 billion, reflecting a robust 9.42 per cent growth over the Tk 4.40 trillion recorded in December 2024.
The sector’s share of total banking deposits stood at 24.38 per cent, underscoring its continued importance within the broader financial system while still operating alongside conventional banking on a dual framework.
Investment activity, broadly equivalent to loans and advances, also expanded but at a slower quarterly pace. Total investments reached Tk 5.25 trillion in December 2025, marking a modest 1.45 per cent increase from the previous quarter. Compared with the same period in 2024, investment volumes grew by 9.55 per cent, rising from Tk 4.79 trillion.
However, the investment-to-deposit ratio declined further to 0.94, down from 0.96 in September 2025 and 0.97 a year earlier. This downward movement suggests a more conservative credit deployment strategy, likely influenced by liquidity management considerations and cautious borrower demand.
Key performance indicators of Islamic banking
| Indicator | Dec 2024 | Sep 2025 | Dec 2025 | Quarterly Change | Year-on-Year Change |
|---|---|---|---|---|---|
| Deposits (Tk trillion) | 4.40 | 4.70 | 4.81 | +2.31% | +9.42% |
| Investments (Tk trillion) | 4.79 | 5.18 | 5.25 | +1.45% | +9.55% |
| Investment–Deposit Ratio | 0.97 | 0.96 | 0.94 | Declining | Declining |
| Export earnings (Tk billion) | 388.22 | 355.28 | 315.31 | -11.25% | -18.79% |
| Import payments (Tk billion) | 533.35 | 491.74 | 470.07 | -4.42% | -11.87% |
| Remittance inflows (Tk billion) | 319.14 | 261.35 | 275.38 | +5.36% | -13.72% |
| Branch network | — | — | 1,743 | Expansion | Growth |
| Islamic windows | — | — | 976 | Expansion | Growth |
| Employment | 52,565 | 50,944 | 47,460 | -6.84% | -9.71% |
External sector activity handled through Islamic banks showed a mixed and generally weaker quarterly performance. Export-related transactions declined sharply by 11.25 per cent to Tk 315.31 billion during the October–December 2025 quarter compared with the previous quarter. Imports also fell by 4.42 per cent to Tk 470.07 billion, reflecting subdued industrial demand and a broader slowdown in trade activity.
In contrast, remittance inflows provided a stabilising influence. Funds mobilised through Islamic banks rose by 5.36 per cent to Tk 275.38 billion, helping to partially offset weaknesses in trade-linked cash flows and supporting liquidity conditions within the sector.
Despite the softer quarterly indicators, structural expansion continued. The number of Islamic banking branches, including those operated by conventional banks offering Islamic services, increased to 1,743 by December 2025. In addition, Islamic banking windows rose to 976, indicating continued institutional penetration and customer demand for Sharia-compliant financial services.
Employment within the sector, however, declined significantly to 47,460, compared with 50,944 in September 2025 and 52,565 a year earlier. This contraction suggests possible operational streamlining or productivity-driven restructuring across banks.
Economists and analysts argue that sustaining the sector’s growth trajectory will require stronger trade finance capabilities, improved efficiency in fund utilisation, and greater diversification of investment portfolios. Enhanced support for export-oriented industries is also seen as essential to maintaining earnings stability.
Policy Exchange Bangladesh Chairman Dr Masrur Reaz noted that while the year-on-year growth in deposits and investments highlights underlying resilience, the slower quarterly expansion reflects cautious lending behaviour amid tighter liquidity conditions and subdued credit demand, signalling the need for targeted measures to sustain momentum in the coming quarters.