Concern over cooperative money
A Bangladesh Bank board member yesterday said he would raise the issue of mobilisation of public money by companies like Destiny Multipurpose Cooperative Society in their next meeting to see whether the act abides by the law.
Shafiq Ahmed said there is a serious fiduciary problem with the multi-level marketing issue. “I did not know that they were mobilising money from their members. To me this is illegal and against the banking law.”
“I will ask the board how can an institution, which is not authorised to mobilise money, do this,” he said.
Ahmed was speaking at a seminar styled “Towards a public policy on microfinance in Bangladesh” jointly organised by Institute of Microfinance and Policy Research Institute of Bangladesh (PRI) at the latter's office in the city.
His comments came as a central bank investigation found proof of illegal banking by Destiny Multipurpose Co-operative Society Ltd, one of Destiny-2000's dozens of concerns.
Such illegal banking is creating chaos in the country's financial sector, said the probe report, which has recently been sent to the finance ministry.
The BB probe found that Destiny has been illegally running banking activities and has nearly 70 lakh members. As of December 31, 2011, it collected nearly Tk 2,000 crore as deposits and share capital from people. Of the deposits, over 94 percent are long-term, says the BB report.
"If its impact is large-scale and there is any adverse impact on the financial stability then we have a responsibility to know about them," said Ahmed.
"It will be raised in the board meeting so that it asks the management of the central bank how they look into it and how public interest is being protected," he said.
Ahmed said if any institution mobilises a huge amount of money from public and uses it, the central bank should know whether these funds are being mobilised and spent abiding by the laws, and the act is not conflicting with the banking laws.
"It is not only applicable to Destiny-2000, but also to all cooperatives that are mobilising money," he said, adding that the central bank would also have to know whether these companies have the authority to raise money in this manner.
Ahmed, also the vice chairman of PRI, said, "What will happen to the depositors if these companies flee with the money collected?"
Ahsan H Mansur, executive director of PRI, said this type of companies are completely unregulated and they have no legal authority to raise deposits.
"From this sense, perhaps the company is involved in illegal activities."
He said companies like JUBOK and Destiny have invested a lot in land properties. "As a result, prices of land have gone up by 10 times. And the whole nation is facing damages due to their speculation."
He said Destiny is a land-based cooperative. "There are many such cooperatives scattered across the country. Their activities need to be clamped down."
"If we cannot clamp down on them, the prices of land will continue to shoot up, and one day it will collapse. Although the country's banking system is not directly linked with land, 80 to 90 percent collaterals are land-based."
"If the quality of the collaterals is damaged then the banks' fundamentals will be shaken," he told The Daily Star.