Power Struggles and Controversy Shake Bangladesh’s Islamic Banking Sector

Bangladesh’s largest private commercial bank operating under Islamic principles appears to be entering yet another phase of significant internal upheaval. Recent developments at Islami Bank Bangladesh Limited have triggered widespread speculation, political debate and public concern, as competing narratives attempt to explain what is really happening behind the scenes.

Just a month ago, the bank’s independent director and Executive Committee Chairman, Mohammad Abdul Jalil, was removed from his position. Shortly afterward, Managing Director (MD) Mohammad Omar Faruk Khan was sent on leave for more than six weeks. These sudden and high-level changes have fuelled intense discussion across social media and among financial observers, many of whom believe these moves are not isolated administrative decisions but part of a broader power realignment.

One of the most widely circulated claims suggests that the controversial industrial conglomerate S Alam Group is attempting to re-establish its control over Islami Bank. According to this narrative, the removal of leadership figures appointed during the interim government period is a strategic step towards restoring the group’s influence over the bank and potentially over other Shariah-based financial institutions as well.

However, an opposing narrative paints a very different picture. Critics of the former management allege widespread irregularities in recruitment under the leadership of Omar Faruk Khan. They claim that while approximately 5,500 employees were hired over a nine-year period previously, the recently removed MD oversaw the dismissal of around 5,500 experienced officers and initiated the recruitment of nearly 5,000 new employees belonging to Jamaat-e-Islami within just five months. These allegations have sparked concerns about transparency, favouritism and possible institutional manipulation within the bank’s human resources practices.

Adding further complexity to the situation, some groups have framed the issue within ideological lines, claiming that efforts were underway to “depoliticise” or “de-Jamaatise” the bank’s operations. These assertions have intensified the already polarised discourse surrounding Islami Bank and the broader Islamic banking sector in Bangladesh.

The tension reached a new level on Sunday when dismissed employees from six Islamic banks organised a human chain protest in Motijheel, the country’s main financial district. The protesting workers demanded reinstatement, claiming they were unjustly terminated without clear justification following political changes in August 2024. According to organisers, nearly 10,000 employees across six Shariah-based banks have been affected by such dismissals.

The banks involved include Islami Bank Bangladesh Limited, First Security Islami Bank, Union Bank, Al-Arafah Islami Bank, Global Islami Bank, and Social Islami Bank. All six institutions were previously linked to the S Alam Group, which reportedly lost control over them following the fall of the Awami League government.

During the protest, participants presented a three-point demand: immediate reinstatement of all terminated employees, payment of outstanding salaries and benefits, and legal guarantees to prevent similar dismissals in the future. The demonstrators argued that their removal was politically motivated and violated basic labour rights.

In a striking counteraction, another group staged a separate demonstration at the same location under the banner of the “Islami Bank Victimised Customers Coordination Council". This group, reportedly backed by members of Jamaat-e-Islami, voiced an entirely different set of demands.

Their five-point charter included calls for the arrest of S Alam and other alleged “looters”, confiscation of their domestic assets, repatriation of funds allegedly laundered abroad, repeal of Section 18A of the recently passed Bank Resolution Act 2026, and government accountability in preventing mob gatherings in front of financial institutions.

Here the Bank Resolution Act 2026 is particularly significant. This new legislation, passed amid considerable debate, provides mechanisms for restructuring troubled banks, including provisions that may allow former owners to regain control under relatively lenient conditions. Critics argue that this could enable previously discredited stakeholders to return to positions of influence, potentially undermining efforts to reform the banking sector.

Supporters of the law, however, contend that it offers a structured path to stabilise financially distressed banks and protect depositors. They argue that without such mechanisms, the risk of systemic instability could increase, especially in a sector already facing governance challenges.

What emerges from this complex situation is a picture of deep institutional uncertainty, where financial governance, political influence and public trust intersect. Islami Bank, once considered a pillar of stability in Bangladesh’s Islamic finance sector, now finds itself at the centre of a multifaceted crisis involving leadership disputes, allegations of corruption, employee unrest and legislative controversy.

The broader implications extend beyond a single institution. The developments highlight vulnerabilities in Bangladesh’s banking governance framework, particularly in how ownership, political transitions and regulatory oversight interact. The involvement of multiple stakeholders (dismissed employees, customer advocacy groups, political actors and regulatory bodies) suggests that the outcome of this new chaos will likely shape the future trajectory of Islamic banking in the country.

For now, uncertainty remains the defining feature. Whether these recent changes represent a genuine attempt at reform, a political recapture, or a combination of both is still unclear. What is certain, however, is that the stakes are high, not only for the bank itself but also for millions of clients and the overall stability of Bangladesh’s financial system.