Bourses need more institutional investors

A thin presence of institutional investors in Bangladesh is a serious problem that needs to be addressed for the country's capital market to reach an international level, according to Salman F Rahman, private industry and investment adviser to the prime minister.

While 80 to 90 per cent of all investments in other international markets are made through institutional investors, the case is just the opposite for Bangladesh, he said.

"Here, individual investors account for 80 to 90 per cent of total investment and this is odd," he said.

Rahman made these comments during an online launch ceremony for World Investor Week 2020, an initiative of the International Organisation of Securities Commission.

The event, observed by over 222 countries worldwide, will be held from October 5 to October 11 with participants attending via digital platforms.

To boost institutional investment, Rahman proposed that investment banking licences should be provided to scheduled banks.

In most international stock markets, individual investments are made through mutual funds but in Bangladesh, the mutual fund products are a weak point.

"Therefore, the mutual fund sector needs reform," he said, adding that Bangladesh has developed in many ways over the past 12 years but it still lags behind in the tax to GDP ratio and market capital to GDP ratio.

There are a number of reputable fund managers in the country who could facilitate the necessary reforms to the mutual fund sector far better than their international counterparts, said Hasan Imam, president of the Asset Management Companies' Association.

"But the problem is a lack of funds," Imam added.

While addressing the event as chief guest, Finance Minister AHM Mustafa Kamal said the government will continue to support the capital market as needed.

Bangladesh's economy is currently in a strong position and the government wants a similarly strong capital market to see the economy grow, he said.

"We want to ease the process of listing and don't want to leave entrepreneurs waiting for years to be listed," said Professor Shibli Rubayat Ul Islam, chairman of the Bangladesh Securities and Exchange Commission.

The BSEC has enhanced its market monitoring of the secondary market so that no one can manipulate and cheat general investors, he added.

"We have long been criticised for not being able to bring expected companies to the stock market but in my experience, this is due to a lack of incentive," said Sayedur Rahman, president of the Bangladesh Merchant Bankers' Association.

Merchant bankers are entitled to bring companies to the stock market.

When an entrepreneur goes to a bank to borrow, he can easily get the funds but when it comes to raising funds from the stock market, there are many legal bindings, he said.

"So, the companies need to get tax incentives while it got listed," Rahman added.

Mashiur Rahman, the economic affairs adviser to the prime minister; various commissioners of the BSEC and top officials and board member of the two bourses were also present at the event.