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The Current State of the Financial Sector of Bangladesh: An Analysis

Author

Listed:
  • Chu V. Nguyen

    (University of Houston-Downtown, Texas, USA)

  • Anisul M. Islam

    (University of Houston-Downtown, Texas, USA)

  • Muhammad Mahboob Ali

    (Presidency University, Bangladesh)

Abstract

The financial sector of Bangladesh is generally small and underdeveloped. This sector consists of a banking segment and an emerging but still nascent capital market segment. The banking segment in the country is relatively more developed than the equity market segment, even though both are quite underdeveloped in international comparison. The root causes of the Bangladeshi financial sector problem are the lack of market discipline due to lack of competition in the banking industry. Excessive government intervention and political connections, economic and political corruptions, operational and managerial inefficiency and ineffectiveness result in vicious circle that inhibits economic development, industrialization, and social progresses in poor and developing countries in general and in Bangladesh in particular. Authors’ suggested that in the financial regulation should be strengthened and further needed reforms should be carried out. In addition, an ombudsman may be appointed in the financial sector. The ombudsman can act independently to investigate any complaints regarding financial services and must work freely and independently. Better financial services and diversified financial products would be the natural consequence of competitive financial industry. The authors argue that a strengthened regulatory environment and additional much needed financial sector reforms, a better and more efficient financial sector may evolve over time and serve better the development needs of the country.

Suggested Citation

  • Chu V. Nguyen & Anisul M. Islam & Muhammad Mahboob Ali, 2011. "The Current State of the Financial Sector of Bangladesh: An Analysis," AIUB Bus Econ Working Paper Series AIUB-BUS-ECON-2011-03, American International University-Bangladesh (AIUB), Office of Research and Publications (ORP), revised Nov 2011.
    • Handle: RePEc:aiu:abewps:38
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    References listed on IDEAS

    as
    1. Syed Basher & M. Kabir Hassan & Anisul Islam, 2007. "Time-varying volatility and equity returns in Bangladesh stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 17(17), pages 1393-1407.
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    Cited by:

    1. Sakib Bin Amin & Ridwan Mosharraf Hossain, 2017. "Finance-Growth Nexus in Bangladesh? An Empirical Analysis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 7(2), pages 152-163, February.
    2. Bipasha Barua & Suborna Barua, 2021. "COVID-19 implications for banks: evidence from an emerging economy," SN Business & Economics, Springer, vol. 1(1), pages 1-28, January.
    3. Mohammad Nayeem Abdullah & Emon Kalyan Chowdhury & Rahat Bari Tooheen, 2022. "Determinants of capital structure in banking sector: a Bangladesh perspective," SN Business & Economics, Springer, vol. 2(12), pages 1-19, December.
    4. repec:mth:ijafr8:v:8:y:2018:i:4:p:227-247 is not listed on IDEAS
    5. Aviral Kumar Tiwari & Anisul M. Islam & Md. Mohibul Islam, 2019. "Relationship between Exchange Rate and Equity Prices in an Emerging Market: A Continuous Wavelet-based Analysis for Bangladesh," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 18(2), pages 165-193, September.
    6. Md. Nur Alam Siddik & Sajal Kabiraj & Shanmugan Joghee, 2017. "Impacts of Capital Structure on Performance of Banks in a Developing Economy: Evidence from Bangladesh," IJFS, MDPI, vol. 5(2), pages 1-18, May.
    7. Touheda Yasmin Chowdhury & Aysa Yeasmin & Zobayer Ahmed, 2018. "Perception of women entrepreneurs to accessing bank credit," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 8(1), pages 1-16, December.
    8. Abdul Kadar Muhammad Masum & Md Abul Kalam Azad & Kazi Enamul Hoque & Loo-See Beh, 2015. "Domestic Banks in Bangladesh Could Ensure Efficiency by Improving Human Resource Management Practices," PLOS ONE, Public Library of Science, vol. 10(7), pages 1-17, July.

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