Bangladesh : Economy, Finance and Banking
Bangladesh : Economy, Finance and Banking
Bangladesh pursues a liberal market economy. Bangladesh Bank is the apex bank of the country responsible for promoting healthy growth and development of the banking system. Banks and insurance companies, both in the private and public sectors, are operating freely and contributing to the economy. Foreign banks like American Express Bank, Standard Chartered Bank, Grindlays Bank, Indosuez Bank, etc. function in Bangladesh through their branches.
There are other specialized financial institutions like the Bangladesh Shilpa Bank (Industrial Bank), Bangladesh Shilpa Rin Sangstha (Industrial credit organization), Krishi (Agriculture) Bank, House Building Finance Corporation, Grameen (Rural) Bank and several cooperative banks. The Industrial Promotion and Development Corporation (IPDC) of Bangladesh and the Investment Corporation of Bangladesh (ICB) provide equity support to public limited companies in the private sector. The government has recently replaced the Controller of Capital Issues by establishing a full fledged Securities and Exchange Commission with enhanced power for the growth and development of the Securities market in Bangladesh. Liberal fiscal policy has resulted in the highest forex reserve.
During the last three years a number of steps have been taken to strengthen the country's banking system. These include improvement of the regulatory environment. enforcement of loan classification guidelines and recapitalisation of nationalized commercial banks. Over the past two years, there has been a massive infusion of taka 32,000 million in the NCBs in the shape of government bonds to make up for capital and provisioning shortfalls.
The commercial banks are now diversifying and strengthening their portfolio. They have increased term lending. Upto April 1994 they have sanctioned term loans totaling taka 10,260 million. Disbursement agricultural loans stood at taka 9,660 million 31 % increase over the same period in 1993. NCBs have introduced loan programmes in off-farm and agro-based activities. NCBs, BSB and BSR have been able to rehabilitate 471 sick industrial units which have create 21,000 new jobs.
The government is keen to correct and remedy failures and
imperfection in the financial markets. A small credit guarantee
scheme has been introduced, to assist new entrepreneurs who
can receive loan of taka 2.5 million without any collateral. To
enlarge the activities of Grameen Bank, which serves the poor,
particularly the women in the rural areas, the government has
provided guarantee against loans amounting to taka 4,650
million in 1993-94 in addition to taka 1000 million provided
directly by the Bangladesh Bank. In the fiscal year 1994-95 the
government has already committed to Grameen Bank to
provide loan guarantee for an additional amount of taka 3850
million.
The reforms of financial sector and trade liberalisation are being complemented by appropriate forex regime. An active exchange rate policy to maintain the competitiveness of the economy is being followed in the backdrop of the Uruguay Round Multilateral Trade Agreements and particularly, the gradual merger of Multi-fibre arrangement into the GATT the exchange rate will be colsely monitored. Taka has been made convertible on all international current transactions. Company laws have been reformed for boosting private investment.
Bangladesh has accepted the obligations of Article VIII of IMF Articles of Agreement which means removal of all restrictions on making payments and transfers for current international transactions. By accepting these obligations, Bangladesh has given a clear signal to the international community that it would pursue sound economic policies, and thereby create a congenial climate for nvestment.
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Acknowledgements:
The author, Shabbir A Bashar gratefully acknowledges the un-precedented help
and co-operation of the Bangladesh High Commission, London, UK in preparation of this document.
He particularly thanks Mr Shihabuddin Ahmed, Minister Press Division, Bangladesh High Commission,
London, and late Mr Mizanur Rahman, Senior Vice President and Representative, Arab-Bangladesh Bank
Ltd., London Representative Office, for their support.
Dedication:In fond memory of late Mizanur Rahman, a friend who died pre-maturely.
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