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FRIDAY, JULY 25, 2025
Restoring trust: The path to accountability in Bangladesh’s financial sector

Thoughts

Md Kyser Hamid
15 January, 2025, 08:25 pm
Last modified: 15 January, 2025, 08:30 pm

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Restoring trust: The path to accountability in Bangladesh’s financial sector

The future of Bangladesh’s financial sector hinges on making accountability its cornerstone. Transparency, ethical practices, and stakeholder alignment are essential for ensuring sustainable growth and stability

Md Kyser Hamid
15 January, 2025, 08:25 pm
Last modified: 15 January, 2025, 08:30 pm

Bangladesh's banking and financial sector plays a critical role in driving economic growth, yet it faces increasing scrutiny over its accountability. Systemic issues such as loan misappropriation, non-performing loans, and corruption have severely impacted public trust. 

Recent revelations in the Economic White Paper highlight systemic corruption, financial mismanagement, and a lack of transparency. This article explores the importance of accountability in restoring trust and ensuring sustainable growth in the financial sector.

 

A disturbing picture of financial mismanagement

According to the 2024 Economic White Paper, illicit financial outflows average $16 billion annually, while distressed assets comprise a staggering 31.7% of total loans. These figures are alarming and indicate the depth of the accountability crisis facing Bangladesh's financial institutions. Politically motivated defaults and loan scams have exacerbated the problem, further eroding public trust and threatening long-term stability.

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The accountability crisis

The Economic White Paper revealed that the banking sector is among the most corruption-ridden in Bangladesh. By mid-2024, distressed assets accounted for 31.7% of total loans. Politically driven defaults and fraudulent loan schemes have worsened the situation, while the average annual illicit financial outflow of $16 billion places a significant strain on the economy. Such practices undermine public confidence and jeopardise the sector's future.

 

Stakeholders and their expectations

Restoring accountability in the financial sector requires addressing the concerns of a wide range of stakeholders.

Customers: Customers should be the top priority for financial institutions, as they drive the core business of banks. Their trust forms the foundation of an institution's reputation. Banks must improve customer service and grievance redressal mechanisms, enhance transparency in fees, terms, and lending policies, launch financial literacy campaigns to educate customers on their rights and protections, and focus on digital security to prevent fraud and cyberattacks.

Regulators: Regulators play a crucial role in ensuring compliance within the financial sector. Non-compliance is a key contributor to image crises, and banks must align with Bangladesh Bank's policies on compliance, risk management, and financial stability. Proactively addressing audit findings and enhancing compliance with anti-money laundering (AML) and counter-terrorist financing (CTF) regulations is essential. Banks should collaborate with regulators to develop a transparent communication strategy for corrective actions.

Employees: Employees are the face of the bank and directly interact with customers, influencing public perception. Banks must conduct ethics training and workshops on customer interaction, empower employees with tools and resources to handle complaints effectively, and reward ethical behaviour to ensure accountability and build public trust.

Media: The media and public perception influencers shape public opinion and can amplify or mitigate a crisis. Banks should engage in proactive public relations by communicating steps being taken to resolve crises, working with reputable media outlets to highlight positive initiatives such as corporate social responsibility programs and community projects, and leveraging social media for direct engagement with the public, addressing concerns transparently.

Shareholders: Shareholders and investors provide financial backing and ensure institutional stability. Banks must keep shareholders informed about crisis resolution plans, emphasise long-term strategies for profitability and risk mitigation, and rebuild confidence by demonstrating a commitment to ethical banking practices.

Communities: Communities are directly impacted by banking practices and influence public perception. Banks should focus on CSR initiatives that address pressing social issues such as financial inclusion and disaster relief, partner with local organisations to build grassroots support, and promote green banking and sustainable financing to appeal to environmentally conscious groups.

Technology partners are essential for securing operations and preventing further reputational damage. Banks should invest in cybersecurity solutions to mitigate risks, collaborate on developing user-friendly digital platforms, and ensure robust systems for handling complaints and providing transparent services.

 

Key challenges facing the sector

The banking sector in Bangladesh faces several key challenges. Loan scandals and defaults, driven by the misappropriation of funds and politically influenced loans, continue to plague the sector. 

Transparency issues, stemming from a lack of clear disclosures and effective oversight, have fostered a culture of secrecy. Inefficient risk management, resulting from weak internal controls, has led to growing non-performing assets, threatening financial stability.

 

The path forward: Building a culture of accountability

To restore trust in Bangladesh's financial sector, protecting depositors must take precedence. Redefining stakeholder priorities and implementing robust safeguards can help rebuild public confidence and ensure a stable, inclusive banking environment. 

Strengthening regulatory oversight is essential, and the powers of Bangladesh Bank must be enhanced to enforce compliance and impose penalties for non-compliance. Promoting transparency through regular disclosures on distressed assets, financial health, and risk management practices is crucial.

Implementing ethical banking practices should be encouraged, with banks adopting frameworks that prioritise customer protection and financial inclusion. Leveraging technology can further improve service delivery, reduce fraud, and enhance the customer experience. Investments in digital tools and cybersecurity solutions are critical to mitigating risks and providing secure, transparent services.

For Bangladesh to achieve financial resilience, robust reforms are needed to address systemic corruption and inefficiencies. By implementing these recommendations, banks and financial institutions can restore trust, align with global standards, and drive inclusive economic growth. 

The future of Bangladesh's financial sector depends on accountability becoming the cornerstone of its operations. Only through transparency, ethical practices, and stakeholder alignment can the sector achieve sustainable growth and stability.

 


Sketch: TBS
Sketch: TBS

Md Kyser Hamid is the Managing Director and CEO of Bangladesh Finance Limited


Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.

 

banking sector in Bangladesh / accountability

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