Islamic banking industry in Bangladesh has grown into one of the biggest in South Asia. According to the Islamic Banking and Finance Statistics Report (2025) of Bangladesh Bank, we now have 10 fully-fledged Islamic banks, 17 conventional banks with Islamic banking branches and 12 conventional banks with Islamic banking windows operational in Bangladesh. At the end of December 2025, these institutions held nearly a quarter of all bank deposits. Millions of families keep their savings with them, often because they trust the model and its values. That trust is mostly well earned. But there is one thing about the most common Islamic account that very few customers understand, which is very crucial for their savings.
Islamic banking operates under a Shariah-compliant profit-and-loss and risk-based approach. Statements from major Islamic banks in Bangladesh show that almost 80-90 percent of their deposits are held in mudarabah savings, term and demand deposit accounts, which are based on a profit-sharing contract.
In a mudarabah savings account, the customer is not merely a depositor or saver; under the mudarabah contract, the customer is an investor, or the Sahib al-Mal, the one who provides the capital. The bank is the mudarib, the manager who invests that money on the customer's behalf.
This may sound like a small point. But, actually, it is not. It decides who pays when money is lost. Profit is shared between the customer and the bank in a ratio agreed at the beginning of the agreement. But if the bank's investments fail in the normal course of business, the loss belongs to the customer, not the bank. It is considered the bank’s loss only when that loss emerges from its own negligence, breach of requirements of trust such as misconduct in respect of the mudarabah fund, and a clear breach of its duty as per contract. Many customers may not be aware of this point. In fact, when customers open a mudarabah account, the usual risk of losses is mainly carried by them, and that is one of the distinguishing features of Islamic banking, which separates it from conventional banking.
Therefore, whenever customers perceive any signs of mismanagement, governance failures, imprudent business decisions, or any development that may jeopardise the safety of their funds in an Islamic bank, it is both natural and practical to raise their concerns and voice their objections, as they are bearing a significant portion of the underlying business risk. On the other hand, this principle works in customers’ favour when the bank is well managed. If the bank is governed properly, makes sound investment decisions, and earns higher profits through efficient operations, mudarabah depositors can enjoy higher returns.
The risk customers bear is not merely on paper. The big financing scandals, governance failures, and the heavy concentration of financing we have seen across Bangladesh's banks in recent years have made it very practical. When a bank loses money through bad financing, lending too much to a few connected borrowers, or when it fails to recover even normal loans, someone has to bear that loss. And, as per the mudarabah principle, customers would primarily bear that loss, with a few exceptions.
However, none of this means Islamic banks are unsafe, or that customers should pull their money out. It means treating the relationship the way an investor would, not the way a casual depositor does. The customer should have a close look at the bank itself. How well it operates, how sound its management is, how good its financing is, and whether it has lent too much to a few large borrowers. In addition, customers should peruse the bank’s annual reports, although published accounts and the regulator's reports are not always perfect.
A change that would help
There is one way out of this obligation that the global Islamic banking and financing standards have already adopted and which gives careful customers a choice. Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) separates two kinds of investment accounts. In an Unrestricted Investment Account, the customer gives the bank a free right to invest the money however it likes. In a Restricted Investment Account, the customer specifies the investment mandate by imposing restrictions on matters such as the purpose of investment, asset classes, economic sectors, geographic areas, investment period, or even specific projects. For example, Malaysia, under the Islamic Financial Services Act (IFSA) 2013, distinguishes investment accounts from Islamic deposits, providing a separate regulatory framework for investment accounts, including restricted and unrestricted investment accounts.
In Bangladesh, almost every mudarabah account is an unrestricted one. Customers usually do not know the nature of investment, and cannot instruct the bank about investing their money in farming, small businesses, exports, housing, healthcare, or green projects, let alone demand other specifications. They also cannot normally choose an investment mandate that reflects their own risk preferences. Although they ultimately bear the investment risk inherent in the mudarabah arrangement, they have little or no say in how their funds are invested.
A Restricted Investment Account, or even a separate investment account with a clear purpose, would change that. It would not remove the risk, as sharing risk is the fundamental principle of Islamic finance. But it would let a careful investor decide where and what and how much risk is taken. That is real participation, and it is closer to the true spirit of mudarabah than what we currently have.
Being careful does not mean going against the system. Islamic banking in Bangladesh is a sound and principled model, built on a great deal of public trust. That trust makes it more important that people understand what they are funding. An informed customer who reads the contract, watches the bank’s business, takes risks wisely, and, where it is possible, chooses how the money is invested, contributes to the long-term health of the sector.
Until Restricted Investment Accounts arrive, awareness is the customer's best protection. The most useful thing an Islamic bank customer in Bangladesh can do today is to realise what the mudarabah account agreement means. This is not just saving; it is also investing, and an investor should always exercise due caution in safeguarding their funds.
Muhammad Arifur Rahman is an advocate of the Supreme Court of Bangladesh. He has postgraduate qualification in Islamic Finance from INCEIF University, Malaysia. He can reached at [email protected].
Views expressed in this article are the author's own.
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