A growing economy, an historically innovative banking sector and a large expatriate population looking for a trusted envoy to handle their money back home combined to make Bangladeshi banks amongst the fastest growing companies in the world.
Three banks in the country -- First Security Islami Bank, Social Islami Bank and Mercantile Bank -- all make the IBTimes 1000 list of the fastest-growing publicly traded companies in the world, with those financial concerns noting compound annual growth rates of 71, 43 and 26 percent, respectively, over three years.
The IBTimes 1000 is an annual compilation, proprietary to the International Business Times, of the fastest growing publicly traded companies based on their compound annual growth rate as calculated over three years.
A big reason for the rise: the surging interest in Islamic finance, as more people have begun to bank on a system that withstood the global financial crisis of 2008 more robustly than the conventional standard.
"There's much more self-confidence within the Islamic finance sector, because it's weathered the crisis better," said Ibrahim Warde, an adjunct professor of international business in the Fletcher School of International Affairs at Tufts University.
"Prior to that, the criticism for Islamic finance was 'Why re-invent the wheel? We have a perfectly good system out there.' That is clearly not heard anymore," Warde added
That self-confidence has resulted in impressive revenue growth for the banks, as an increase in the depositor base and the business opportunities that come with that has led all three banks to increase both their investment and fee income since 2008.
In its last reported full-year statement, for example, First Security Islami Bank saw net investment income, the difference between profits earned in investment and those paid to depositors, jump over 400 percent, from 202 million taka ($2.46 million) to 1.01 billion taka. Income from fees was up 45.9 percent
At least two of the Bangladeshi banks in the IBTimes 1000, First Security and Social Islami, seem to have seen a lot of their deposit base growth result from the introduction of financial products devout Muslims feel don't go against their religious prohibition on "riba," a term that denotes excess compensation but is commonly understood as conventional interest.
The last full-year statement for Social Islami Bank, for example, shows the growth in term mudaraba deposits, which the bank uses for a special kind of shared-risk limited-partnership investments, of over 56 percent. Deposits into cash waqf fund accounts, which invest in certain kinds of socially beneficial enterprises and provide bank customers with a certificate of deposit, grew 58.9 percent at the bank.
A lot of those new deposits and loans are tiny in nature, the result of a country where the banking system in many ways served as a cradle to modern micro-finance during the late 1970s and 1980s with the rise of benchmark Grameen Bank.
"The whole idea of Islamic banking was looked at in terms of what Grameen Bank was doing," Warde, the Tufts professor says about the way new financial products have been developed in Bangladesh.
Remittances drive growth
Interestingly, Bangladeshis abroad sending money back to home banking institutions form a large part of the growth story for banks. Part of it is due to the fact banks in the country have historically controlled remittance transfers from abroad: international giant Western Union, for example, didn't have a deal to operate offices in the country until 2008.
Part of it is interest-rate arbitrage, as banks in the country pay double-digit returns on deposit. With many savings account in Western banking systems paying almost nothing, some Bangladeshis have decided it's worth it to put their money in banks back home, even if it is subject to foreign exchange and volatility risks
"These days, with interest rates in developed financial markets being at near zero, the relatively high returns in domestic banks and financial institutions should attract resources parked outside the country to be ploughed back in," Zaidi Sattar, chairman of the Policy Research Institute of Bangladesh, wrote in the country's Financial Express.
The influx of monies has had a marked effect. Bangladesh's savings surplus, the amount of currency deposited in the country's financial system minus the amount invested domestically, averaged 5 percent of total GDP between 2006 and 2009, for example.
The final factor helping Bangladeshi bank growth: a healthy economic environment that barely nudged down as much of the rest of the world was mired in the Great Recession. GDP growth, according to the International Monetary Fund, has been constantly around the 6 percent mark, with the slowest growth rate, of 5.91, occurring in 2009.
That has helped the investment growth of many banks, like First Security Islami, which has 38.7 billion taka invested in domestic industry, mostly in import, trading and finance.
Those investments seem to jibe with the bank's mission statement, noted in its website to "above all, to add effective contribution to the national economy."