Bangladesh Bank Issues First-Ever Regulatory Framework For Islamic Credit Cards With Shariah Compliance Rules

🏛 Bangladesh Bank has issued the country''s first-ever comprehensive guideline for Islamic Credit Card (ICC) operations, opening the door for Islamic banks and Islamic windows of conventional banks to offer Shariah-compliant credit cards under specified models. The guideline, issued by the central bank''s Islamic Banking Regulation and Policy Department, requires banks to avoid riba (interest), maysir (gambling) and gharar (uncertainty) in all ICC transactions.

📊 The framework is a landmark move for Bangladesh''s Islamic banking sector, which accounts for roughly a quarter of the country''s total banking deposits and advances but has so far operated without a dedicated central bank guideline for credit cards. The absence of a regulatory template had limited banks'' ability to expand into the Shariah-compliant credit card segment, despite strong customer demand from Bangladesh''s''s fast-growing middle-class Islamic banking customer base.

💰 Two permitted models

The guideline allows banks to offer Islamic Credit Cards under two distinct models, each with its own rules on how banks can charge fees and structure the customer-bank relationship:

• ✅ Qard Hasan with Ujrah Model (mainly for unsecured cards): Treats merchant payments and cash withdrawals as Qard Hasan, or interest-free loans. Customers must repay only the principal amount, while banks cannot charge any interest or profit on the loan. Banks may charge Category B Ujrah, or service fees, for card issuance, account management and payment-network services. Such fees cannot exceed the bank''s actual direct costs, cannot include any profit element, and cannot vary based on the outstanding loan amount, tenure or payment delay.
• ✅ Covered Card or Cash-Collateralised Card Model: Allows cards against cash deposits or other collateral. As transactions are settled from the cover, no Qard Hasan is created. Banks can therefore charge Category A service fees, which may include a profit element. Fees must be fixed according to the card type and cannot vary with the credit limit or deposit amount.

⚠ Merchant Category Code filtering mandated

Banks must introduce automated Merchant Category Code (MCC) filtering to block Shariah-non-compliant transactions, including those involving alcohol, gambling, conventional insurance, pork processing and interest-based financial services. The Shariah Supervisory Committee of each bank must approve the prohibited MCC list and monitor its implementation, with the system audited at least annually to ensure compliance.

The MCC filtering requirement is a critical operational safeguard: it ensures that Islamic credit cards cannot be used at merchants whose businesses violate Shariah principles, even if the cardholder attempts to use the card for such transactions. Banks will need to invest in payment-processing systems that can identify and decline transactions at non-compliant merchants in real time — a non-trivial operational requirement that will likely drive upgrades across the issuing banks'' card management platforms.

👥 Late payment fee rules

The guideline also sets rules for late payment fees. A fixed fee may be imposed on a financially capable customer who fails to pay on time as a deterrent under the Islamic principle of Iltizam bi al-Tabarru''. Crucially, the late payment fee cannot be treated as bank income — instead, it must be deposited into a separate Charity Account for approved charitable activities under the Shariah Supervisory Committee''s supervision. This ensures that banks cannot profit from customer defaults, a key distinction from conventional credit card late fees which are a significant revenue stream for issuers in many markets.

The charity account requirement aligns with the broader Islamic finance principle that money should not beget money through penalty interest, but that deterrents can exist if the proceeds are channelled to charitable purposes. Banks will need to set up auditable charity account mechanisms and ensure the funds are disbursed to approved charitable causes under Shariah committee oversight.

🤝 Industry reaction

Bangladesh Bank Islamic Banking Regulation and Policy Department Director Anisur Rahman told The Business Standard that despite the popularity of Islamic banking in Bangladesh, there had been no specific guideline for Shariah-compliant credit cards, limiting banks'' ability to expand in the segment. The new framework closes that regulatory gap.

Former Islami Bank Bangladesh additional managing director Mohammad Jamal Uddin Mazumde welcomed the move, saying there had previously been no central guideline. He noted that his bank already offers a Shariah-compliant ''Khidmah'' credit card with good customer demand, but its Ujrah model allows only processing and service fees, while operating costs can be high. The new guideline gives the sector a level playing field and clarifies the boundaries within which banks can structure their Islamic card products.

🌏 Implications for Bangladesh''s Islamic banking sector

The new guideline has significant implications for Bangladesh''s Islamic banking sector. Islamic banks such as Islami Bank Bangladesh, Al-Arafah Islami Bank, Shahjalal Islami Bank, Social Islami Bank and the Islamic windows of conventional banks will now be able to issue credit cards under a clear regulatory framework, opening up a revenue stream that has historically been dominated by conventional banks.

The guideline also aligns with Bangladesh Bank''s broader push to formalise and grow the Islamic banking segment, which has been gaining market share over the past decade but has faced criticism for inconsistent Shariah compliance practices across institutions. By mandating MCC filtering, late payment fee charity accounts and Shariah Supervisory Committee oversight, the central bank is tightening governance and bringing Islamic card operations into line with international best practice seen in markets such as Malaysia, Saudi Arabia and the United Arab Emirates.

For consumers, the guideline should result in a more transparent and standardised Islamic credit card offering across banks. Customers will be able to compare cards on a like-for-like basis, knowing that all issuers must adhere to the same Shariah compliance, fee structure and consumer protection rules. This should spur competition among Islamic banks, leading to better products, more competitive fees and improved customer service.

💰 Strategic context for Bangladesh''s financial inclusion agenda

The Islamic credit card guideline also feeds into Bangladesh''s broader financial inclusion agenda. Bangladesh has a large unbanked and underbanked population, particularly in rural areas where conventional banking penetration remains limited. Islamic banking has proven to be an effective channel for reaching these populations, given the cultural and religious affinity for Shariah-compliant financial products. By extending the Islamic banking product suite to include credit cards, Bangladesh Bank is creating a pathway for millions of currently cash-reliant customers to access formal credit channels.

For Bangladesh''s broader digital payments agenda, the guideline also matters because it brings Islamic credit cards into the formal digital payment ecosystem. With MCC filtering and payment-network integration, Islamic credit cards will be accepted at compliant merchants across the country, increasing the overall penetration of digital payments and reducing reliance on cash transactions.

The Bangladesh Bank guideline applies to all scheduled banks operating Islamic banking windows or full-fledged Islamic banks in Bangladesh. Banks are expected to begin developing their Islamic credit card products under the new framework in the coming months, with the first Shariah-compliant cards issued under the central bank guideline expected to hit the market in early 2027.