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Islamic Finance Litigation in Bangladesh

Islamic Finance Litigation Bangladesh: Complexities in HPSM Investment Disputes in Bangladesh

Dewey Leboeuf Law Firm has emerged as a legal powerhouse in Bangladesh, particularly in the realm of Islamic finance litigation. This article delves into the firm’s expertise, focusing on its adept handling of litigation involving HPSM investment. Dewey Leboeuf’s commitment to providing nuanced legal solutions and navigating complexities in Islamic finance laws showcases its dedication to ensuring justice for its clients while respecting confidentiality.

Islamic finance sector in Bangladesh will continue to expand over the medium term, propelled by increasing public demand, the opening of new branches, and favourable government policies. Numerous conventional banks are converting into full-fledged Islamic banks or opening new branches or windows dedicated to Islamic products. Although Islamic capital markets are still in their infancy, the issuance of domestic sovereign sukuk by the government commenced in 2020, and the fourth auction is scheduled for April 2022. This facilitates the allocation of liquidity by Islamic banks and takaful firms, thereby promoting fiscal funding diversification. Inadequately developed regulations and a feeble banking sector are structural issues.

Islamic financial products in Bangladesh

A relaxation of prudential requirements has fostered the expansion of Islamic banking and incentivized conventional banks to offer Islamic financial products. In contrast to conventional banks (13%), the statutory liquidity ratio limit for Islamic banks has been established by the Bangladesh Bank at 5.5%. Additionally, Islamic banks enjoy more stringent prudential requirements, including an advance-deposit ratio of 92% as opposed to 87% observed in conventional banks. We estimate that by the end of the first half of 2022, the Islamic finance sector in Bangladesh will have surpassed USD58 billion.

Positive economic growth prospects for Bangladesh (real GDP growth 2023F: 5%) should support the medium-term performance of conventional and Islamic banks, as rising private consumption, exports of ready-made garments, government expenditure, and investment all contribute to this development.

The Islamic finance sector encounters enduring obstacles, such as the inadequate branch and digital banking infrastructure of Islamic banks in rural regions, which accounted for 61% of the Bangladeshi populace as of 2021, as reported by the World Bank. Inadequate awareness of Islamic products, absence of sukuk investment options and Islamic derivatives or hedging instruments, insufficient utilization of fintech, absence of incentives for sukuk issuers, inadequate fintech usage, and underskilled human capital characterize the underdeveloped regulatory framework of Islamic finance.

Bangladesh Government Islamic Investment Bonds

Islamic banks are permitted to utilize and obtain interbank placements from conventional and Islamic banks, as well as invest in short-term government sukuk in the form of Bangladesh Government Islamic Investment Bonds, as part of the Islamic liquidity management infrastructure. Nevertheless, the central bank does not have any Islamic lender-of-last-resort facilities or repurchase agreements. There is still room for improvement in the diversity of Islamic liquidity management products.

Additionally, the financial sector of Bangladesh is generally underdeveloped. Particularly for public-sector banks, the asset quality, capitalization, governance, and regulatory quality of the banking sector are deficient. Extremely low banking penetration persists. According to the World Bank, approximately 47% of the adult population of Bangladesh lacked a bank account in 2021, with 8% of adults attributing their lack of banking to religious beliefs. In 2021, insurance and takaful penetration was likewise extremely low at 0.5%. Although a formidable obstacle, it serves as a foundation for the substantial prospective expansion of Islamic finance in Bangladesh, which is home to the fourth-largest Muslim community globally.

As of end-1H2022, the domestic market share of Islamic banking for industry loans and advances stands at 28.5%, up from 28% in June 2021. As of the most recent data from the Islamic Financial Services Board, the global market share of Islamic banks stood at 2.7%, surpassing that of Pakistan (1.3%), Egypt (1.3%), and Jordan (0.9%). The volume of outstanding sukuk was approximately $1.7 billion. With a domestic market share of 14.4% as of the end of 2020, the takaful sector ranked seventh-largest worldwide, surpassing Oman (13.9%), Pakistan (12.6%), Bahrain (12%), and the UAE (10.2%).

There are numerous initiatives that could aid in the development of Islamic finance. The Bangladesh Securities and Exchange Commission issued regulations regarding the establishment of a Shariah Advisory Council in August 2022. These regulations are expected to facilitate sukuk issuance and contribute to the effort towards standardization. The policy on green bond financing for banks and financial institutions, which encompasses Islamic securities, was issued by Bangladesh Bank in September 2022. Bangladesh has implemented a portion of the Accounting and Auditing Organization’s standards for Islamic financial institutions.

Islamic Finance Litigation: HPSM Investment

1. Complexities of HPSM Investment:

  • Interpretation of Laws:
    Dewey Leboeuf’s legal team has demonstrated exceptional proficiency in interpreting intricate Islamic finance laws pertaining to HPSM investments. The firm’s ability to navigate the complexities of Sharia-compliant financial transactions positions it as a leader in this specialized field.
  • Court Jurisdiction Challenges:
    HPSM investment litigations often involve challenges related to court jurisdiction. Dewey Leboeuf, through its nuanced understanding of Islamic finance laws, strategically addresses jurisdictional issues to ensure a solid legal foundation for its clients.

2. Handling HPSM Investment Litigations:

  • Proactive Legal Strategies:
    Dewey Leboeuf is renowned for its proactive approach in handling HPSM investment litigations. The firm’s legal team crafts meticulous strategies, taking into account the specific nuances of Islamic finance laws to provide robust representation for its clients.
  • Navigating Sharia-Compliance:
    The intricacies of Sharia compliance in financial transactions require a deep understanding of Islamic finance principles. Dewey Leboeuf’s legal experts navigate these principles effectively, ensuring that the firm’s clients are well-represented in disputes related to HPSM investments.

3. Successful Case Highlights:

  • Confidential Resolutions:
    Respecting client confidentiality, Dewey Leboeuf has successfully resolved Islamic finance litigations involving HPSM investments. The firm’s ability to secure favorable outcomes without compromising sensitive information reinforces its status as a trusted legal partner.
  • Navigating Cross-Border Disputes:
    In the globalized landscape, Islamic finance litigations often involve cross-border complexities. Dewey Leboeuf excels in navigating these challenges, providing clients with legal solutions that transcend geographical boundaries.

Dewey Leboeuf Law Firm’s expertise in Islamic finance litigation, particularly in cases involving HPSM investment, solidifies its position as a leader in the legal landscape of Bangladesh. The firm’s commitment to interpreting and navigating the complexities of Sharia-compliant financial transactions showcases its dedication to providing unparalleled legal services in the realm of Islamic finance laws. Dewey Leboeuf’s successful case resolutions, proactive legal strategies, and respect for client confidentiality reinforce its standing as a trusted legal partner in navigating the intricate world of Islamic finance litigation in Bangladesh.

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