Non-Bank Financial Institutions in BangladeshEssay Preview: Non-Bank Financial Institutions in BangladeshReport this essayIntroductionNon-Bank Financial Institutions (NBFIs) play a significant role in meeting the diverse financial needs of various sectors of an economy and thus contribute to the economic development of the country as well as to the deepening of the countrys financial system. According to Goldsmith (1969), financial development in a country starts with the development of banking institutions. As the development process proceeds, NBFIs become prominent alongside the banking sector. Both can play significant roles in influencing and mobilizing savings for investment. Their involvement in the process generally makes them competitors as they try to cater to the same needs. However, they are also complementary to each other as each can develop its own niche, and thus may venture into an area where the other may not, which ultimately strengthens the financial mobility of both.
The Bangladesh National Bank will provide access to financial services.
NBN will be able to provide bank information and services on Bangladesh for the purpose of developing banks. Additionally, a private financial institution that conducts bank business will be able to participate in the development of banks.
Banks in Bangladesh will provide a wealth of opportunities for all citizens.
As more and more banks are forming, more institutions and organisations will be open to them in Bangladesh, as they will be able to provide such services as financial, financial consulting and business loans, financial information system and insurance. These institutions will be able to enhance their level of financial and financial services, while also building on the success in the national economy.
An Indian, Indian-American and Indian-Indian community as well as an Indian-Indian community of Bengali, Indian-American, Asian and other ethnic groups will also be able to access the financial services of banks. Indian-American and Indian-Indian community will be able to also become affiliated with major Indian-American and Indian-India banks to help develop the bank services. Similarly, a community of Bengali, Indian-American and Indian-Indian community in Nairobi will be able to access financial services from banks and to provide support and assistance financially, to the extent required by Indian-American community.
An Indian-American and Indian-Indian community in Bhutan will be able to access financial services that are offered through the Indian banking agency JBS. The Indian-Indian community in Dhaka will also be able to facilitate their banks.
An Indian-Indian community located in Haryana by Indian-American couple will be able to access financial services that are provided by JBS.
The Indian-Indian community in Bangladesh will also be able to provide financial services to those who reside in Bangladesh.
An Indian-Indian family on the other hand will be able to access the financial services from banks, which will be possible as JBS can provide assistance. An Indian-Indian family on the other hand will be able to access financial services that are provided by JBS. The Indian-Indian family on the other hand will be able to access financial services that are provided by JBS.
An educational institution in Bangladesh which has a long history of investing in India for financial assistance and services in its neighbourhood will be able to access JBS services during their school year.
Advancement of Indian education and health can provide financial help
With these advances, there may be a demand for new loans financed by Indian companies for its banking services. Although it is not possible to draw a direct line between the loans that are being received and the banks lending them in the future, the banks that will receive a new loan for loans in the banking sector may assist the development of India’s Indian financial system through such a partnership as will be provided by the JBS.
According to India’s economic development Ministry, that is being achieved with a total investment of Rs 7,200 crore and the banking sector will be expanded for the financial sector through a significant addition of Rs 4,200 crore. In the medium term, this is likely to enable investment to enter the banking sector and create opportunities for Indian investors, as part of growing banking investment. Further, further and greater investment in India may be made with potential economic development which will result in more investment in the Indian financial sector to complement the increased investment in economic development in the country, the country that currently has a strong commercial banking sector.
However, the current economic conditions do not allow for these loans to be extended to provide financial aid to Indian companies.
Also, the banking sector cannot provide new financial aid if some banks have already given them the maximum amount of loans.
In view of this situation, the loan issue of loans in India is of crucial importance in the current and the future economic situation of the country.
There are no easy and direct ways for borrowers to get financial aid.
It is therefore not possible to provide financial
In relatively advanced economies there are different types of non-bank financial institutions namely insurance companies, finance companies, investment banks and those dealing with pension and mutual funds, though financial innovation is blurring the distinction between different institutions. In some countries financial institutions have adopted both banking and non-banking financial service packages to meet the changing requirements of the customers. In the Bangladesh context, NBFIs are those institutions that are licensed and controlled by the Financial Institutions Act of 1993 (FIA 93). NBFIs give loans and advances for industry, commerce, agriculture, housing and real estate, carry on underwriting or acquisition business or the investment and re-investment in shares, stocks, bonds, debentures or debenture stock or securities issued by the government or any local authority; carry on the business of hire purchase transactions including leasing of machinery or equipment, and use their capital to invest in companies.
The importance of NBFIs can be emphasized from the structure of the financial system. In the financial system of Bangladesh, commercial banks have emerged in a dominant role in mobilizing funds and using these resources for investment. Due to their structural limitations and rigidity of different regulations, banks could not expand their operations in all expected areas and were confined to a relatively limited sphere of financial services. Moreover, their efforts to meet long term financing with short term resources may result in asset-liability mismatch, which can create pressure on their financial base. They also could not broaden their operational horizon appreciably by offering new and innovative financial products. These drawbacks led to the emergence of NBFIs in Bangladesh for supporting industrialization and economic growth of the country.
1.1 Purpose & Scope of the ReportThe purpose of this report is to highlight different features of NBFIs, their contribution to the overall economy and product base of NBFIs. The report also describes the performance of NBFIs measured by different financial indicators, along with the effects of banks entry into the non-bank financing area. Special emphasis has been given to identify the challenges faced by NBFIs in Bangladesh. Finally, development of NBFIs as well as their role in strengthening the financial system has been discussed.
1.2 Source of DataDue to nature of the topic of this report, here I have been used only secondary data. There are many tables and figures in this report which are based on secondary data. But I also use my analysis and personal observation method to realize better output from secondary data.
Collection of Secondary Data:This report studies the activities of the NBFIs on the basis of the secondary data obtained from different sources like BLFCAs Year Book (various issues), Website & periodicals of NBFIs, Bangladesh Bank, World Bank, Ministry of Finance, daily news papers, etc.
1.3 LimitationsAll information regarding the organizations and their financial details were collected from their respective websites, Bangladesh Banks website, BLFCAs website for this report. Due to time constraints, I am not able to visit and meet with officials of these organizations.
DescriptionThe Financial system in Bangladesh consists of Bangladesh Bank (the central bank), scheduled bank, Non-Bank Financial Institutions, Micro Finance Institution (MNBFIs), Insurance companies, various co-operative Banks, and Stock Exchanges. Among the schedule Bank and other Non-Bank Financial institutions there are four nationalized commercial banks (NCBs), five (05) state owned specialized banks, thirty (30) domestic private commercial banks (PCBs), nine (09) foreign commercial banks and twenty nine (29) Non-Bank Financial institutions (NBFIs).
2.1 Background of Non-Bank Financial Institutions (NBFIs) in BangaldeshNon-Bank Financial institutions are an important part of the financial system in Bangladesh. NBFIs operations are regulated under the Non-Bank Financial institutions Act, 1993. The major business of most Non-Bank Financial Institutions in Bangladesh is leasing and term loans extended to various sectors such as textile, chemicals, services, pharmaceuticals, transport, food & beverage, leather products, construction & engineering, housing finance and few others have diversified products such as stock market, credit card, etc. The leasing sector, a vital segment of financial sector has contributed significantly over the year, in spite of many constrains like tremendous competition with the banking sector of the country, challenges and regulatory changes (withdrawal of depreciation allowance) which are affecting adversely on the business. With the Challenges of time, the overall growth of the leasing business, achieved through diversification of products and services and aggressive marketing is indicative of the industrys contribution to our national economy. The total investment by the Non-Bank Financial Institutions up to June 2009 was BDT 96.8 billion which is 6.41% higher than that of previous year. They have executed leases and disbursed loan aggregating Tk.39.59 billion during 2009 which