Bank of Ceylon’s Islamic banking charts new course for Sri Lanka’s growth

THE global financial system is undergoing a profound transformation. On one hand, technological disruption is redefining how banks interact with customers. On the other, sustainability imperatives are forcing financial institutions to rethink their role in addressing climate change and social inequalities.

- In conversation with Deputy General Manager — Branch Credit Operations — Range | K.A. Ajith Karunarathne

Bank of Ceylon Deputy General Manager – Branch Credit Operations – Range I K.A. Ajith Karunarathne

Against this backdrop, Islamic banking has emerged as a viable alternative and as an increasingly mainstream component of global finance. Rooted in ethical princi ples that forbid speculative activi ties and encourage investment in productive, socially responsible sectors, Islamic banking is now valued in the trillions of dollars and expanding into new geographies.

For Sri Lanka, a country searching for innovative ways to stimulate growth, attract investment, and ensure financial inclusion, Islamic banking holds particular promise. Bank of Ceylon (BOC), which pioneered the first Islamic banking window in 2009, continues to lead the way in shaping this sector locally. To understand the global and national dimensions of Islamic finance, its challenges, and its future role in Sri Lanka’s economic development, Deputy General Manager — Branch Credit Operations — Range I K.A. Ajith Karunarathne shares his views in this discussion.

Islamic banking is experiencing strong momentum worldwide. According to the 2024 Islamic Finance Development Index, the industry’s total assets stood at $ 4.9 trillion in 2023, an 11% increase from the previous year. Of this, Islamic banking accounted for $ 3.6 trillion, showing 12% year-on-year growth. Projections suggest the industry could reach $ 6.7 trillion by 2027, a figure that underscores its rapid expansion.

Several key trends are shaping this growth. First, the adoption of financial technology is transforming how Islamic banks operate. From mobile banking apps designed specifically for Shari’ah-compliant products to blockchain-based smart contracts that improve transparency, technology is making Islamic banking more accessible and efficient.