Achieving The Objectives of Shariah Through Riba-Free Banking Operations: Evidence From Eight Islamic Banks in Bangladesh

This study provides a comprehensive empirical investigation into the extent to which Islamic banks in Bangladesh effectively fulfill the Shariah objectives (Maqaṣid al-Shariah), with particular emphasis on the elimination of riba (interest). Drawing on a substantial primary dataset comprising 820 respondents—equally divided between 410 bank employees and 410 customers—from eight full-fledged Islamic banks, the research adopts a robust quantitative approach to examine the dynamics between Shariah-compliant financial practices and the realization of interest-free banking. Methodologically, the study employs Exploratory Factor Analysis (EFA) to identify underlying dimensions of Shariah-compliant banking practices, followed by Structural Equation Modeling (SEM) to assess the structural relationships among key variables. In addition, multiple regression techniques—including logistic regression, probit models, and Linear Probability Models (LPM)—are utilized to ensure the consistency and reliability of the estimated effects. The empirical findings reveal that both deposit and investment (financing) products of Islamic banks exert statistically significant and positive influences on the effective elimination of riba. These results highlight the critical role of well-designed and genuinely Shariah-compliant financial products in advancing the core objectives of Islamic finance. Furthermore, the study underscores that the success of riba elimination is not solely dependent on product availability but also on the strength of institutional mechanisms, particularly Shariah governance frameworks, compliance monitoring, and ethical commitment. Overall, the findings suggest that strategic product innovation, supported by rigorous Shariah supervision and governance, is essential for Islamic banks to achieve both the economic efficiency and moral imperatives embedded within the Shariah Objectives (Maqaṣid al-Shariah).

Islamic banking, Shariah Objectives ie. Elimination of Riba, Deposit Products, and Financing (Investment) Products.

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