Banks in Bangladesh are contributing to the rise in inequality as they collect deposits from people from all walks of life but give loans to only a few, analysts said yesterday.
“There is a mechanism to get financing from banks and it deprives small entrepreneurs. This has widened the inequality in the country,” said Hossain Zillur Rahman, a former adviser to a caretaker government.
AB Mirza Azizul Islam, also a former adviser, echoed Rahman, saying banks are reluctant to set up branches in rural areas, a tendency that limits grassroot entrepreneurs and businesses’ access to formal financing.
They spoke at the launch of the Banking Almanac 2017 at the National Press Club auditorium in Dhaka.
A number of speakers said lenders carry out campaigns to mobilise deposits from people from all walks of life, but they hardly bankroll to marginalised entrepreneurs.
Rahman said the banking sector has a role in taking the country forward, but it is inflicted by various problems.
The sector burdened with non-performing loans (NPL) is going through a liquidity crisis and charges higher interest rate, he said.
At the same time, they are making a robust operating profit, which is contradictory, the economist said.
“Corporate governance should be strengthened to ensure people’s trust in the financial sector.”
Rahman also said the country needs financing to keep the momentum of industrialisation and growth and banks are still the core sector to cater the funds. But there is a problem in providing long-term financing with short-term deposits, he said.
“The country requires a vibrant bond market immediately to create a scope for long-term financing.” The banking almanac will help depositors park funds with good banks as people have little scope to differentiate good lenders from bad ones at the moment, Mirza Aziz said.
“Written-off and restructured loans along with NPLs should be mentioned as stressed assets in the banking almanac with a view to painting the actual picture of the sector,” he said. The banking sector alone is unable to fulfil the credit demand of the financial sector, said Jamaluddin Ahmed, a director of the central bank’s board.
“The country’s equity market often faces volatility. A long-term financing model for the industrial sector should be formulated,” he said. There is a little opportunity to avail information about the financial sector, said Salehuddin Ahmed, a former governor of the central bank.
The almanac will help people know about the financial sector in details, allowing them to take informed decision, said Ahmed, also the chairman of the editorial council of the book. Md Nazrul Huda, a former deputy governor of the central bank; Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh (ABB), and Mohammed Nurul Amin, a former chairman of the ABB, also spoke.