At a time when the financial sector needs further consolidation and tight supervision, the government has issued licences for 11 insurance companies and nine banks, leaving the industry saturated and prone to risks.
Curiously, the licences, which come at the twilight of the government's tenure, were awarded mostly to people with connections to the ruling Awami League.
The Awami League government, in its previous tenure, too, between 1996 and 2001, issued a total of 31 insurance licences and 13 banks.
In contrast, the BNP-led government, during its tenure between 2001 and 2006, issued no new licences for the financial sector. Even in its earlier tenure during 1991-1996, the main opposition party issued only eight licences for the banking sector and none for insurance.
This, therefore, raises questions as to why the Awami league-led government is so trigger-happy when it comes to issuing licences.
Ahsan H Mansur, executive director of Policy Research Institute, recalled how the then finance minister M Saifur Rahman and Bangladesh Bank Governor Dr Fakhruddin Ahmed were able to steer clear of issuing any new licences to the financial sector.
“At that time, Bangladesh Bank was sitting on 40 applications for licences for new banks, most of which were linked to Hawa Bhaban. But, Saifur Rahman, with his guts, was able to handle the political pressure.”
Regarding last Thursday's decision to grant 11 new insurance licences, he said: “The insurance sector in Bangladesh is at a very rudimentary form. It needs urgent reforms and definitely not new licences.”
Industry people, upon conditions of anonymity, said the sector, which at present has 62 companies, is already saturated, meaning the government's recent decision will take the marketplace over the edge.
“It's very unfortunate that new licences have been given on political consideration and not on the quality and performance of the sponsors,” said an applicant who was denied a licence for a life insurance company despite having years of experience in running a premium general insurer.
For instance, Railway Minister Mujibul Haque is a sponsor of one of the 11 new companies, Sonali Life Insurance, while Faridunnahar Lily, a ruling party lawmaker from reserved seat, is a sponsor of another, Zenith Islami Life Insurance.
Chief Whip Abdus Shahid has a stake at Chartered Life Insurance, where the Awami League-linked businessman Noor Ali's Unique Hotel and Resort is the other sponsor.
It is the same story over at Mercantile Islami Life Insurance, where Nasiruddin, an Awami League leader in Chittagong, is a major sponsor. Major (retd) Rafiqul Islam, a former home minister and Awami League leader, is a sponsor for Protective Life Insurance.
Meanwhile, the applicant said the general insurance market, which has 43 companies at present, has no room for a new entrant. “But the government still decided to give two licences, making the sector vulnerable to risks.”
Shefaque Ahmed, chairman of Insurance Development and Regulatory Authority (IDRA), could not be reached for his comments at the time of writing.
The licences awarded last week are for: Sonali Life Insurance, Mercantile Islami Life Insurance, Taiyo Summit Life Insurance, NRB Global Life Insurance, Protective Life Insurance, Guardian Life Insurance, Chartered Life Insurance, Best Life Insurance, Zenith Islami Life Insurance, Sikder General Insurance Company and Sena Kalyan General Insurance Company.