Governance Apathy and Systemic Barriers in Enforcing Shariah Compliance: A Critical Study of Islamic Banking Practices in Bangladesh

Abstract

Over the past few decades, the Islamic banking sector in Bangladesh has developed tremendously, but it is still struggling to establish the ability to support compliance with the Shariah guidelines. The research paper examines the root causes of non-compliance and deals particularly with the indifference of the senior management and the board members when it comes to believing in Shariah-based operational principles. The study, based on a mixture of regulatory reviews, qualitative interviews, and institutional case experiences, determines a tangled net of challenges, featuring the absence of Shariah literacy, insufficient internal monitoring, misapplication of regulatory largesse (such as reduced SLR/CRR), corruption, and external political pressure. These discoveries explain the fact that Shariah departments tend to work with low powers and that Bangladesh Bank, which is the central regulatory authority, has not carried out strict actions against the culprits, and this further promotes systemic indifference. This is worsened by the lack of a special Islamic banking statute and diminishing religious drive among the staff and customers of the banks. To make it clear that Islamic banking is not merely symbolic in Bangladesh, this paper requests a structural reform in the mechanism of governance, an improved legal framework, and the re-medicalizations of Islamic financial institutions in the country.

Keywords: Islamic Banking, Shariah Compliance, Bangladesh, Financial Governance, Religious Motivation, Central Bank Regulation, Institutional Corruption