I think they had there own formation the Hanjar SS division.
The German policy was to keep the units separate, because uniting them could lead to a more powerful formation that could challenge the Germans dominance in that ares.
http://www.serbianna.com/columns/savich/006.shtml
Dzafer Kulenovic, the Bosnian Muslim Vice-President of the NDH, had been the president of the Yugoslavian Muslim Organization (JMO) and was the political leader of the Bosnian Muslims. Eleven Muslim political leaders of the JMO were invited to be part of the Ustasha NDH parliament in Zagreb. The Ustasha Commissioner for Bosnia-Hercegovina was Bosnian Muslim Hakija Hadzic
From the beginning of the German invasion of Yugoslavia, the Bosnian Muslims had sought to convince the Germans that Bosnia-Hercegovina should be a Nazi Protectorate, that is, have an autonomous political existence. In 1941, over 100,000 Bosnian Muslim conscripts were available to fight in the military formations of the Third Reich. Bosnian Muslim soldiers were in the Ustasha death squads, the Domobranci (Home Guards), and the Croatian Army. Bosnian Muslim soldiers were also in the Nazi-Ustasha German-Croatian "Legion" units, such as the 369th, 373rd, andÝ392nd Infantry Divisions. In The Holocaust: The Fate of European Jewry, 1932-1945, Leni Yahil remarked that the Bosnian Muslims even sent their soldiers to fight on the Russian front as part of the Nazi German forces:Ý "One of their units later joined the German forces fighting in Russia." The 369th Reinforced Croat Infantry Regiment, made up of Croats and Bosnian Muslims, fought at Stalingrad where it was destroyed. The NDH also sent the Italian-Croat Legion, attached to the Italian 3rd Mobile Division, to the Russian front where it was destroyed during the Don retreat.
The Bosnian Muslims formed purely Muslim formations as well, the most important of which was the Muslim Volunteer Legion, led by Mohammed Hadzieffendic. Other Muslim formations were the Zeleni Kadar (Green Cadres), Nazi formations created by deserters from the Home Guards (Domobranci), led by Neshad Topcic, the Muslim nationalist group, the Young Muslims (Mladi Muslimani), Huska Miljkovicâs Muslim Army, and the Gorazde-Foca milicijas (policing units).