Economy at risk as people losing trust in financial institutions: Experts

Banks and financial institutions in Bangladesh are losing people's trust due to various issues, including liquid crisis and non-performing loans, according to experts.

As a result, the country's economy is gradually getting damaged. Moreover, the financial institutions are not succeeding in gaining the trust of local and foreign investors, the experts highlighted during a discussion at the EMK Center in Dhaka on Saturday (25 May).

Speaking at the discussion titled "Development Opportunities in Emerging Economies", Former IMF Assistant Director and Associate at the Global Center for Finance and Policy Laura E Kodres underscored the pivotal role of central banks, particularly in maintaining trust through prudent monetary policy.

She said, "The main action of a central bank is to create trust of the investors and others. Also, ensuring depositors can retrieve their funds and facilitating lending for productive endeavours.

"In today's more globalised world, a central bank not only supervises commercial banks but it also has a mandate to maintain the value of money. So when depositors do get their money back, potentially with interest, that will actually help the country's financial stability."

In the panel discussion, moderated by Md Minhaz Bin Salim, the experts also emphasised the impact of technology on Bangladesh's stock market, bank and other financial institutions. 

They noted that the proper use of technology in the financial sector will increase the trust of the customers and also will help increase the investment in this sector.

Asian Tiger Capital Partners Chairman Ifty Islam said, "Financial technology could be a prime solution to reaching more investors with a variety of products at cheap prices and getting utmost returns.

He added, "Technology has a huge role and opportunity to play in bringing more investors into Bangladesh's capital markets, potentially increasing the number of trading accounts to 20 million if we achieve similar proportions to China.

"Imagine a future where a rickshaw driver's digital wallet automatically allocates his earnings into savings, mutual funds, and health insurance, transforming him into an active investor in Bangladesh's stock market."

Managing Director of Chittagong Stock Exchange PLC (CSE) M Shaifur Rahman Mazumdar underscored the need for comprehensive policy support in the capital market. 

He said, "The policy makers need to address a sound tax GDP issue. There are very few in our country."

He emphasised the need for policies tailored to different sectors, stating, "The NBR is solely focused on revenue collection without providing specific policy directions for sectoral development. For instance, in the capital market, we require targeted policy support. Therefore, ensuring a robust regulatory structure becomes imperative."

Legal economist and columnist MS Siddiqui remarked on the issue of market manipulation, stating, "Most of the companies are not giving the dividend. Now, when the problem arises, the mindset of the investors prompted the market manipulators to take advantage of this situation."

He further said, "We observe numerous non-profitable and weak companies experiencing sudden increases in share prices without any apparent reason or merit. This could be due to rumours or technical manipulations, creating a situation where inexperienced investors end up losing their money in the stock market."

Referring to the country's Small and medium-sized enterprises [SME] sector situation and said, "Though we love SMEs but looking into this sector's policy, we see that all of our policies are very regressive to this sector."

Prof Dr Abdul Hannan Chowdhury, former dean of the School of Business and Economics (SBE) at North South University (NSU), highlighted the importance of creating a conducive environment for entrepreneurs, stating, "Country is yet not being able to actually create an atmosphere for entrepreneurs to even start their businesses. So ease of doing business is something very important for Bangladesh to actually help out the entrepreneurs."