WB offers $100m to fortify insurance, pension sectors
The World Bank has offered Bangladesh $100 million for strengthening the insurance sector and the private pension market so that the financial sector can give better service to the people.
The Washington-based multilateral lender has recently sent a draft proposal to the finance ministry in this regard.
There has been notable progress in financial sector development over the years increasing the depth of the financial sector from 12 percent in 1980 to 70.8 percent in June 2013, the draft proposal said.
Progress has been made in many other fronts as well including the strengthening of banking sector regulation and supervision, financial access to households and recent efforts to fortify state-owned banks.
"But this remains an unfinished agenda, especially with regard to the insurance and pension sector."
Subsequently, it suggested $35 million for strengthening the Insurance Development and Regulatory Authority and Bangla-desh Insurance Academy, $40 million for the modernisation of state-owned insurance companies and $20 million for developing a private pension market.
A WB mission has already visited Bangladesh with the draft proposal and held meetings with concerned officials of various ministries, a finance ministry official said.
The finance division has suggested the WB take separate projects for the insurance and pension sectors, he said.
Direct support for the IDRA from the WB will involve providing advisory and capacity building services as well as equipment to upgrade IDRA's regulatory and supervisory functions.
To increase its capacity, the IDRA has to formulate rules, regulations and guidelines to set up risk-based solvency rules, improve products for life and non-life insurance and market practice including micro-insurance, the WB said.
Under the project, support to develop new insurance distribution channels such as bank assurance, automation/digitisation of insurance sales/service and improve claim management system will be provided.
Various insurance companies, both life and general, are operating in the country but there are no regulatory authorities for them, said the finance ministry official.
The government has been considering raising the power of the IDRA to international standards with financial and technical assistance from the WB.
Like the state banks, the nationalised insurance companies have various weaknesses, especially in case of digitisation.
Under the project, the WB has proposed strengthening policy and practices on reinsurance mechanism of state-owned Sadharan Bima Corporation and Jiban Bima Corporation.
The WB mission found that state-owned companies do not meet the international best standards, the official said.
The IDRA will regulate the state-owned and private companies in the same manner and ensure that there will be no discrimination, the WB also said.