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Development of Non Bank Financial Institutions to Strengthen the Financial System of Bangladesh

  • MONZUR HOSSAIN

    (National Graduate Institute for Policy Studies)

  • MD. SHAHIDUZZAMAN

    (Bangladesh Bank - Motijheel Office)

Non-bank financial institutions (NBFIs) represent one of the most important parts of a financial system. In Bangladesh, NBFIs are new in the financial system as compared to banking financial institutions (BFIs). Starting from the IPDC in 1981, a total of 25 NBFIs are now working in the country. As on June 30, 2001 the total amount of paid up capital and reserve of 24 NBFIs stood Tk.6901.8 million (BB, 2002). The NBFIs sector in Bangladesh consisting primarily of the development financial institutions, leasing enterprises, investment companies, merchant bankers etc. The financing modes of the NBFIs are long term in nature. Traditionally, our banking financial institutions are involved in term lending activities, which are mostly unfamiliar products for them. Inefficiency of BFIs in long-term loan management has already leaded an enormous volume of outstanding loan in our country. At this backdrop, in order to ensure flow of term loans and to meet the credit gap, NBFIs have immense importance in the economy. In addition, non-bank financial sector is important to increase the mobilization of term savings and for the sake of providing support services to the capital market. The focus of this paper is to highlight the necessity and importance of NBFIs to strengthen the financial system for rapid economic development of the country.

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File URL: http://econwpa.repec.org/eps/fin/papers/0409/0409006.pdf
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Paper provided by EconWPA in its series Finance with number 0409006.

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Length: 21 pages
Date of creation: 06 Sep 2004
Date of revision:
Handle: RePEc:wpa:wuwpfi:0409006
Note: Type of Document - pdf; pages: 21. Suggested citation of this paper is:Hossain, Monzur and Shahiduzzaman, Md., 'Development of Non Bank Financial Institutions to Strengthen the Financial System of Bangladesh' . Quarterly Journal of Bangladesh Institute of Bank Management (BANK PARIKRAMA), Vol. 28, No. 1, March 2002
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