Financial System in Bangladesh

 

Part-01

A financial system is a set of financial instruments, financial market, financial institutions, regulations that permit the exchange of funds.

It has three board fragmented sectors. Such as-

1.      Formal sector

2.      Semi-formal Sector

3.      Informal Sector.

Formal Sector: It refers to regulated financial sector that handle within the legal farmwork established by regulatory authorities. Its components are given below:

v  Bangladesh Bank: It regulated 62 scheduled banks, 5 Non-scheduled bank & 35 non-bank financial Institutions.

o   State owned commercial banks -09

o   Private commercial Banks -33

o   Islamic Banks -10

o   Foreign commercial Banks-09

o   Digital Bank-01

o   Bangladesh Bank was established as per “Bangladesh Bank Ordinance (BBO) 1972” and it operated and regulated as per “Bank Company Act 1991 (with amendment up to 2023), Financial Institutions Act 1993 (with Amendment up to 2023).

 

v  Bangladesh Securities & Exchange Commission (BSEC act 1993): It maintain actually securities market and all related thing of Bangladesh. It has the regulatory body to observe the market. It has the following components:

o   Stock exchange- Dhaka Stock Exchange & Chittagong Stock Exchange

o   Marchant Banks

o   Central Depository (CDBL)

o   Depository Participants

o   TREC (Trading Right Entitled Certificate) Holders: DSE-250 & CSE-147

o   Credit Rating Agencies

o   Custodian of security & Mutual Fund

o   Trustees of Debt Securities

o   Trustees of ABS

o   Trustees of Mutual Fund

o   Trustees of Alternative Investment Fund (AIF)

o   Asset Management Companies

o   AIF Manager.

(Note: we will provide the component’s details later)

v  Insurance Development & Regulatory Authority (IDRA act 2010): The act is played in Bangladesh to establish the Insurance Development and Regulatory Authority. The following categories companies are under IDRA.

o   General Insurance Companies- 46

o   Life Insurance Companies-32

 

v  Microcredit Regulatory Authority (MRA act 2006): It is enacted in Bangladesh microfinance activities, including microcredit operations, microfinance institutions, and NGOs.

o   Microcredit Credit Organizations- 800 (As last update in January 2022)

 

Semi-Formal Sector: The instructions that are regulated differently but do not come within the purview of the Securities and Exchange Commission, the Central Bank, Insurance Authority, or any other financial regulator that has been put into effect are included in the semi-formal sector. It is mainly focused by Specialized Financial Institutions like:

o   House Building Finance Corporation (HBHC)-1952

o   Palli Karma Sahayak Foundation (PKSF)-1990

o   Samabay Bank (Name changed-1977; Established 1922)

o   Grameen Bank-1983 (project start-1976)

o   Non-Government Organizations (NGOs) and discrete government programs.

Informal Sector: The informal sector includes private intermediaries that are completely unregulated. These institutions usually operate by obtaining a trade license from City Corporation or Certification from different Ministries or Department of the Government.