• Sunday, October 26, 2014

Cash flow slowing

Sajjadur Rahman

Cash flow in the economy shrank in the past several months due to the ongoing strikes and blockades.
The business community and bankers say if the situation does not improve immediately, cash movement may plummet further and hurt the economy's growth potential.
“The daily transaction value through our ATM network has declined drastically. Our 300 staffers across the country are sitting idle,” said Kazi Saifuddin Munir, chief executive officer of ITCL, the parent company of Q-Cash.
Q-Cash, a leading electronic payment gateway in Bangladesh, has around 2,300 automated teller machines (ATMs), serving clients of 33 member banks.
On a normal day, an average of Tk 450 crore is transacted through the Q-Cash ATMs, which rises to Tk 600 crore around special days such as Eid, but the daily transaction value has now dropped to below Tk 100 crore, Munir said.
The value of point of sale (POS) transactions, where customers make payment to merchants for goods or services, has dropped to Tk 300 crore a day now from Tk 1,200 crore previously.
Transactions through Dutch-Bangla and BRAC banks that run two other ATM networks also declined, but not drastically. In October 2013, nearly Tk 2,500 crore was transacted through 2,450 Dutch-Bangla ATMs; it has dropped to about Tk 2,100 crore in both November and December, according to Abul Kashem Mohammad Shirin, deputy managing director of the bank.
Transactions through BRAC Bank's ATM dropped by 7 percent in the last two months compared to the same time in the previous year, said Zeeshan Kingshuk Huq, head of corporate affairs and service quality.
The trend in cash flow is more or less similar to the business houses that cannot deliver goods to retailers, who also cannot sell goods to consumers due to the ongoing strikes and blockades. Banks are also sitting on idle funds, as borrowers are not taking even their sanctioned loans.

“Goods are being produced at our factories, but we cannot make deliveries and collect cash from the retailers,” said Lutful Bari, director (operations) of Meghna Innove Rubber that makes tyres, tubes and parts for bicycles, motorcycles and CNG-run three-wheelers.
Helal Ahmed Chowdhury, managing director of Pubali Bank, said there is no study on how the cash movement has dropped exactly, but it is certain that the cash flow has been hampered by the political impasse.
“Now, cash management has become a big challenge, as some branches have huge surplus funds and some are running short of cash,” Chowdhury said.
Political unrest has also slowed implementation of the government-sponsored development programmes by 5 percentage points in the first five months of the current fiscal year compared to the same time in the previous year. Of Tk 65,872 crore earmarked for the annual development programme this fiscal year, only Tk 13,156 crore or 20 percent was spent in July-November.
Foreign investments, which are an important source of money inflow in an economy, also declined in recent months as foreign entrepreneurs are shying away from making any fresh investment in Bangladesh, according to a Board of Investment official.
BoI received only 7 proposals in October 2013, against 15 in September, data shows. Foreign companies proposed to invest only $20 million in October against a commitment of $1.91 billion a month ago. The number of local investment proposals also declined to 75 in October from 81 in September.

Published: 12:00 am Wednesday, January 08, 2014

Last modified: 10:01 pm Wednesday, January 08, 2014

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