Case 2 : Liquidity crisis in Shariah based banks of Bangladesh.

Case scenario: In 2023, several Shariah based banks in Bangladesh began facing a severe liquidity crisis. Reports emerged that some Shariah based banks were unable to meet the growing demand for withdrawals by depositors. Confidence in these banks started to erode due to concerns over :

-Excessive financing to related parties (group exposure);
-Weak governance and oversight;
-Political influence;

Unlike conventional banks, Islamic banks in Bangladesh do not have access to conventional interbank borrowing or interest-based tools. This made liquidity management more challenging.

Task : As prudent Islamic banker, your task is to analyze the reasons for the liquidity stress in Islamic banks and recommend sustainable solutions. Your analysis should consider both regulatory and Shariah-compliant market-based mechanism.