Bangladesh Bank has announced that it will launch an Islamic interbank money market by June 30, aiming to address liquidity management challenges faced by Islamic banks that cannot participate in conventional interest-based call money markets. The initiative acknowledges a long-standing structural weakness in the country’s Islamic banking system, where banks lack a Shariah-compliant mechanism for short-term borrowing and lending.

However, economist M. Kabir Hassan argues that the proposed model overlooks the sector’s ongoing financial distress and governance failures. Several Islamic banks reportedly have negative equity, high default rates, and allegations of large-scale fund misappropriation. The author warns that introducing an interbank liquidity pipeline among such institutions could spread financial contagion rather than resolve liquidity issues. He notes that Bangladesh lacks essential Shariah-compliant instruments such as central bank sukuk or Islamic treasury bills, which are prerequisites for a functional market.

Hassan recommends that Bangladesh Bank first develop tradable Islamic financial instruments, set eligibility criteria for participating banks, ensure separate clearing systems for Islamic transactions, and strengthen Shariah supervision. He emphasizes that broader reforms, including new legislation and stronger central bank independence, are necessary to restore public trust in Islamic banking.