London property freeze encouraging

The freezing of nearly £90 million worth of luxury property in London, linked to two associates of the country's deposed prime minister, has offered a sense of accomplishment to Bangladeshi authorities.

The Bangladesh Bank governor sees the development as a significant boost to the country's ongoing efforts to recover wealth laundered abroad.

"There is growing international pressure to return money laundered from Bangladesh. The Financial Times, The Times (London), and Al Jazeera have run news on this issue, and more reports are expected," Bangladesh Bank Governor Ahsan H Mansur said yesterday.

He added that British Members of Parliament and non-governmental organisations were also showing support. "I believe the UK's National Crime Agency's freezing of the assets [came] due to this pressure."

Welcoming the development as "highly encouraging", he called for sustained momentum in the asset recovery drive.

Mansur was speaking at the launch of the "Credit Enhancement Scheme" under the Microenterprise Financing and Credit Enhancement Project of the Palli Karma-Sahayak Foundation (PKSF) in Dhaka's Agargaon area.

"A significant amount of illicit wealth linked to Bangladeshi individuals and institutions is still scattered across the UK. We hope those assets will also be identified and frozen," Mansur said at a programme in Dhaka.

Responding to questions from journalists about the timeline for repatriating the frozen assets, the governor said that seizure alone does not lead to immediate return.

"Asset seizure is not directly linked to repatriation. It comes after legal proceedings," he commented.

"However, once seized, the assets cannot be sold or transferred until the trial is concluded, which is a very significant step. Now it will be up to the court to decide whether the assets belong to the UK or Bangladesh. We will now initiate the legal process."

Asked about the high lending rates in the microcredit sector, the governor pointed out that the cost of operations in microfinance remains high, due mainly to its labour-intensive nature.

In contrast, he said, the banking sector has automated much of its work, bringing down operational expenses.

"If the microcredit sector can also adopt automation and become more efficient, the cost of managing funds will fall, allowing them to lower interest rates," he said.

He said the wide gap between current interest rates, which range from 14 to 15 percent for bank loans and 24 to 26 percent in the microcredit sector, is unsustainable.

"Unless microcredit institutions innovate and improve their efficiency through technology, they will struggle to stay competitive," added the governor.

"In a competitive market with digital banks, mobile financial services, nano-loans, and traditional lenders, efficiency is essential," he added. "We will not intervene through regulation, we want the market to discipline itself."

Mansur also said that the central bank is currently reviewing the country's existing digital banking licences.

During the event, PKSF signed agreements with five commercial banks and one investment company.

Speaking on the occasion, PKSF Chairman Zakir Ahmed Khan said, "The Credit Enhancement Scheme is being launched to formally involve commercial banks in the efforts of PKSF to transform low-income people of the country into entrepreneurs.

Under this scheme, PKSF's partner organizations (POs) will take loans from banks and disburse them to eligible entrepreneurs at the grassroots. PKSF will provide guarantee for the entire risk of this loan at the bank level."

Asian Development Bank's Country Director Hoe Yun Jeong highlighted the lender's longstanding partnership with PKSF.

He said the ADB has financed $370 million across seven PKSF projects since 1997, including $200 million for the MFCE project in 2023, under which the new scheme is being introduced.

"We are optimistic that the Credit Enhancement Scheme will be successful, and it will pave the way for further financial innovation in the microfinance sector in Bangladesh," he said.