Introduction

Financial sector reform in Bangladesh started in 1976 with privatization of the banks to

encourage private investment, and continue in the mid-1980s as part of Structural Adjustment

Policies (SAP), between 1992 and 1996, a Financial Sector Reform Programmed (FSRP) was

implemented. Its major aim was to improve the operations of Nationalized Commercial Banks &

(NCBs) through the development of new banking technologies, computerization of

banking operations, upgrading of skills, changing outdated internal banking practices

and corporate and credit cultures. Further reforms are underway. In Bangladesh, there are 49

banks & with 6318 branches of which there are 30 private commercial banks, 10 foreign

commercial banks and 9 nationalized commercial and specialized banks. The banking sector

employs about 110,000 people. Total deposits and loans and advances also increased

considerably. between 1990and 2005 some financial deepening has taken place as a result of

intensive reforms in the 3nancial system. Foreign joint venture banks now hold about 9.5 percent

of the total assets of commercial banks.

A financial institution is an establishment that conducts financial transactions such as

investments, loans and deposits. Almost everyone deals with financial institutions on a regular

basis. Everything from depositing money to taking out loans and exchanging currencies must be

done through financial institutions. Here is an overview of some of the major categories of

financial institutions and their roles in the financial system. A brokerage acts as an intermediary

between buyers and sellers to facilitate securities transactions. Financial markets (bond and stock

markets) and financial intermediaries (banks, insurance companies, pension funds) have the

basic function of getting people like Inez and Walter together by moving funds from those who

have a surplus of funds (Walter) to those who have a shortage of funds (Inez). More realistically,

when IBM invents a better computer, it may need funds to bring it to market. Similarly, when a

local government needs to build a road or a school, it may need more funds than local property

taxes provide. Well-functioning financial markets and financial intermediaries are crucial to

economic health.

To study the effects of financial markets and financial intermediaries on the economy, we need

to acquire an understanding of their general structure and operation. In this chapter, we learn

about the major financial intermediaries and the instruments that are traded in financial markets

as well as how these markets are regulated.

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Financial institution

In financial economics, a financial institution is an institution that provides financial for its

clients or members. Probably the most important financial service provided by financial

institutions is acting as financial intermediaries. Most financial institutions are

highly regulated by government.

Broadly speaking, there are three major types of financial institutions:

1. Deposit-taking institutions that accept and manage deposits and make loans,

including banks, building societies, credit unions, trust companies, and mortgage

loan companies

2. Insurance companies and pension funds; and

3. Brokers, underwriters and investment funds.

Standing settlement instructions

Standing Settlement Instructions (SSIs) are the agreements between two financial institutions which fix the receiving agents of each counterparty in ordinary trades of some type. These agreements allow traders to make faster trades since the time used to settle the receiving agents is conserved. Limiting the trader to an SSI also lowers the likelihood of a fraud. SSIs are used by financial institutions to facilitate fast and accurate cross-border payments.

The financial system of Bangladesh consists of three broad sectors. They are

1. Formal sector

2. Semi-formal sector

3. Informal sector

The sectors have been categorized in accordance with their degree of regulation. The formal

sector includes all regulated institutions like banks, non-bank financial institutions (FIs),

insurance companies, capital market Intermediaries like brokerage houses, merchant banks etc.;

micro finance institutions (MFIs).

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The semi formal sector includes those institutions which are regulated otherwise but do not fall

under the jurisdiction of Central Bank, Insurance Authority, Securities and Exchange

Commission or any other enacted financial regulator.

This sector is mainly represented by Specialized Financial Institutions like House Building

Finance Corporation (HBFC), Palli Karma Sahayak Foundation (PKSF), Samabay

Bank, Grameen Bank etc., Non-governmental organizations (NGOs) and discrete government

programs.

Formal sector

The sectors have been categorized in accordance with their degree of regulation.The formal sector includes all regulated institutions like Banks, Non-Bank Financial Institutions (FIs), Insurance Companies, Capital Market Intermediaries  like Brokerage Houses, Merchant Banks etc.; Micro Finance Institutions (MFIs). 

The formal sector of the financial system of Bangladesh comprises two sub-sectors

1. Financial Market2. Regulators & Institutions

Financial market

There are three types of financial markets in Bangladesh. They are:

1. Money Market : Banks, Non-bank Financial Institutions, and Primary Dealers2. Capital Market : Investment Banks, Credit Rating Companies, and Stock Exchanges3. Foreign Exchange Market : Authorized Dealers.

Regulation

Financial institutions in most countries operate in a heavily regulated environment because they are critical parts of countries' economies, due to economies' dependence on them to grow the money supply via fractional reserve lending. Regulatory structures differ in each country, but typically involve prudential regulation as well as consumer protection and market stability. Some countries have one consolidated agency that regulates all financial institutions while others have separate agencies for different types of institutions such as banks, insurance companies and brokers.

Countries that have separate agencies include the United States, where the key governing bodies

are the Federal Financial Institutions Examination Council (FFIEC), Office of the Comptroller of

the Currency - National Banks, Federal Deposit Insurance Corporation (FDIC) State "non-

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member" banks, National Credit Union Administration (NCUA) - Credit Unions, Federal

Reserve (Fed) - "member" Banks, Office of Thrift Supervision - National Savings & Loan

Association, State governments each often regulate and charter financial institutions.

Semi-formal sectorThe semi-formal sector includes those institutions which are regulated otherwise but do not fall

under the jurisdiction of Central Bank, Insurance Authority, Securities and Exchange

Commission or any other enacted financial regulator. This sector is mainly represented

by Specialized Financial Institutions like House Building Finance Corporation (HBFC), Palli

Karma Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc., Non-Governmental

Organizations NGOs and  discrete government programs.

The semi formal sector comprises some Specialized Financial Institutions:

1. House Building Financial Corporation(HBFC)2. Palli Karma Sahayak Foundation(PKSF)3. Samabay Bank4. Grameen Bank

Function of Financial Markets

Financial markets perform the essential economic function of channeling funds from households,

firms, and governments that have saved surplus funds by spending less than their income to those

that have a shortage of funds because they wish to spend more than their income. Those who

have saved and are lending funds, the lender-savers, are at the left, and those who must borrow

funds of finance their spending, the borrower-spenders, are at the right. The principal lender-

savers are households, but business enterprises and the government (particularly state and local

government), as well as foreigners and their governments, sometimes also find themselves with

excess funds and so lend them out.

Financial markets perform the essential economic function of channeling funds from households,

firms, and governments that have saved surplus funds by spending less than their income to those

that have a shortage of funds because they wish to spend more than their income Those who

have saved and are lending funds, the lender-savers, are at the left, and those who must borrow

funds to finance their spending, the borrower-spenders, are at the right. The principal lender-

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savers are households, but business enterprises and the government (particularly state and local

government), as well as foreigners and their governments, sometimes also find themselves with

excess funds and so lend them out.

Why is this channeling of funds from savers to spenders so important to the economy? The

answer is that the people who save are frequently not the same people who have profitable

investment opportunities available to them, the entrepreneurs. Let’s first think about this on a

personal level. Suppose that you have saved $1,000 this year, but no borrowing or lending is

possible because there are no financial markets. If you do not have an investment opportunity

that will permit you to earn income with your savings, you will just hold on to the $1,000 and

will earn no interest. However, Carl the Carpenter has a productive use for your $1,000:

He can use it to purchase a new tool that will shorten the time it takes him to build a house,

thereb earning an extra $200 per year. If you could get in touch with Carl, you could lend him

the $1,000 at a rental fee (interest) of $100 per year, and both of you would be better off. You

would earn $100 per year on your $1,000, instead of the zero amount that you would earn

otherwise, while Carl would earn $100 more income per year (the $200 extra earnings per year

minus the $100 rental fee for the use of the funds).

The existence of financial markets is also beneficial even if someone borrows for a purpose other

than increasing production in a business. Say that you are recently married, have a good job, and

want to buy a house. You earn a good salary, but because you have just started to work, you have

not yet saved much. Over time, you would have no problem saving enough to buy the house of

your dreams, but by then you would be too old to get full enjoyment from it.

Well-functioning financial markets also directly improve the well-being of consumers by

allowing them to time their purchases better. They provide funds to young people to buy what

they need and can eventually afford without forcing them to wait until they have saved up the

entire purchase price. Financial markets that are operating efficiently improve the economic

welfare of everyone in the society.

Financial banks in Bangladesh

The commercial banking system dominates Bangladesh's financial sector. Bangladesh Bank is

the Central Bank of Bangladesh and the chief regulatory authority in the sector. The banking

system is composed of four state-owned commercial banks, five specialized banks, thirty eight

private commercial banks, one land development bank and nine foreign commercial banks. The

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Nobel Prize–winning Grameen Bank is a specialized micro-finance institution, which

revolutionized the concept of micro-credit and contributed greatly towards poverty reduction and

the empowerment of women in Bangladesh.

Central bank

Bangladesh Bank

Pursuant to Bangladesh Bank Order, 1972 the Government of Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank of the country, and named it Bangladesh Bank with retrospective effect from 16 December 1971.

Banks

After the independence, banking industry in Bangladesh started its journey with 6 Nationalized

commercialized banks, 2 State owned Specialized banks and 3 Foreign Banks. In the 1980s

banking industry achieved significant expansion with the entrance of private banks. Now, banks

in Bangladesh are primarily of two types:

Scheduled Banks:

The banks which get license to operate under Bank Company Act, 1991 (Amended in 2003) are

termed as Scheduled Banks. State-owned commercial banks, private commercial banks, Islamic

commercial banks, foreign commercial banks and some specialized banks are Scheduled Banks.

Non-Scheduled Banks:

The banks which are established for special and definite objective and operate under the acts

that are enacted for meeting up those objectives, are termed as Non-Scheduled Banks. These

banks cannot perform all functions of scheduled banks. Graeme Bank, Probate Kalian Bank,

Karmasangsthan Bank, Promote Co-operative Land Development Bank Limited (promote Bank)

and Answer VDP Unna an Bank are Non-Scheduled Banks.

Commercial Bank 

A financial institution that provides services, such as accepting deposits, giving business loans

and auto loans, mortgage lending, and basic investment products like savings accounts and

certificates of deposit. he traditional commercial bank is a brick and mortar institution it tellers,

safe deposit boxes, vaults and ATMs. over, some commercial banks do not have and physical

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branches and require consumers to complete all transactions by phone or Internet. Interchange,

the$ general higher interest rates on investments and deposits, and charge lot referees.

There are eight private Islamic Commercial Banks in Bangladesh:

1. Islami Bank Bangladesh Limited

2. Al-Arafah Islami Bank Limited

3. Export Import Bank of Bangladesh Limited

4. Social Islami Bank Limited

5. Shahjalal islami Bank Limited

6. First Security Islami Bank Limited

7. Union Bank Limited

8. ICB Islamic Bank Limited

Investment Banks

The stock market crash of 1929 and ensuing Great Depression caused the United States

government to increase financial market regulation. The Glass-Seagull Act of 1933 resulted in

the separation of investment banking from commercial banking.While investment banks may be

called "banks," their operations are far different than deposit-gathering commercial banks. An

investment bank is a financial intermediary that performs a variety of services for businesses and

some governments. These services include underwriting debt and equity offerings, acting as an

intermediary between an issuer of securities and the investing public, making markets,

facilitating mergers and other corporate reorganizations, and acting as a broker for institutional

clients.

They may also provide research and financial advisory services to companies. As a general rule,

investment banks focus on initial public offerings (IPOs) and large public and private share

offerings. Traditionally, investment banks do not deal with the general public.

However, some of the big names in investment banking, such as JP Morgan Chase, Bank of

America and Citigroup, also operate commercial banks. Other past and present investment banks

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you may have heard of include Morgan Stanley, Goldman Sachs, Lehman Brothers and First

Boston. Generally speaking, investment banks are subject to less regulation than commercial

banks. While investment banks operate under the supervision of regulatory bodies, like

the Securities and Exchange Commission, FINRA, and the U.S. Treasury, there are typically

fewer restrictions when it comes to maintaining capital ratios or introducing new products.

Insurance Companies

Insurance companies pool risk by collecting premiums from a large group of people who

want to protect themselves and/or their loved ones against a particular loss, such as a fire,

car accident, illness, lawsuit, disability or death. Insurance helps individuals and companies

manage risk and preserve wealth. By insuring a large number of people, insurance

companies can operate profitably and at the same time pay for claims that may arise.

Insurance companies use statistical analysis to project what their actual losses will be within

a given class. They know that not all insured individuals will suffer losses at the same time

or at all.

BrokeragesA brokerage acts as an intermediary between buyers and sellers to facilitate securities

transactions. Brokerage companies are compensated via commission after the transaction has

been successfully completed. A brokerage can be either full service or discount. A full service

brokerage provides investment advice, portfolio management and trade execution. In exchange

for this high level of service, customers pay significant commissions on each trade. Discount

brokers allow investors to perform their own investment research and make their own decisions.

The brokerage still executes the investor's trades, but since it doesn't provide the other services of

a full-service brokerage, its trade commissions are much smaller. 

1. Southeast Bank Limited[3]

2. Meghna Bank Limited3. Bangladesh Commerce Bank Limited4. Bank Asia Limited5. AB Bank Limited6. Dhaka Bank Limited

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7. Dutch Bangla Bank Limited8. Eastern Bank Limited9. IFIC Bank Limited10.Jamuna Bank Limited11.Mercantile Bank Limited12.Midland Bank Limited13.Modhumoti Bank Limited14.Mutual Trust Bank Limited15.National Bank Limited

Investment Companies

An investment company is a corporation or a trust through which individuals invest in

diversified, professionally managed portfolios of securities by pooling their funds with those of

other investors. Rather than purchasing combinations of individual stocks and bonds for a

portfolio, an investor can purchase securities indirectly through a package product like a mutual

fund.

There are three fundamental types of investment companies: unit investment trusts (UITs), face

amount certificate companies and managed investment companies. All three types have the

following things in common:

An undivided interest in the fund proportional to the number of shares held

Diversification in a large number of securities

Professional management

Specific investment objectives

Let's take a closer look at each type of Investment Company.

Unit Investment Trusts (UITs)

A unit investment trust, or UIT, is a company established under an indenture or similar

agreement. It has the following characteristics: 

The management of the trust is supervised by a trustee.

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Unit investment trusts sell a fixed number of shares to unit holders, who receive a

proportionate share of net income from the underlying trust.

The UIT security is redeemable and represents an undivided interest in a specific

portfolio of securities.

The portfolio is merely supervised, not managed, as it remains fixed for the life of the

trust. In other words, there is no day-to-day management of the portfolio.

Face Amount Certificates

A face amount certificate company issues debt certificates at a predetermined rate of interest.

Additional characteristics include: 

Certificate holders may redeem their certificates for a fixed amount on a specified date,

or for a specific surrender value, before maturity.

Certificates can be purchased either in periodic installments or all at once with a lump-

sum payment.

Face amount certificate companies are almost nonexistent today.

Management Investment Companies

The most common type of investment company is the management investment company, which

actively manages a portfolio of securities to achieve its investment objective. There are two types

of management investment company: closed-end and open-end. The primary differences

between the two come down to where investors buy and sell their shares - in the primary or

secondary markets - and the type of securities the investment company sells.

Closed-End Investment Companies: A closed-end investment company issues shares in

a one-time public offering. It does not continually offer new shares, nor does it redeem its

shares like an open-end investment company. Once shares are issued, an investor may

purchase them on the open market and sell them in the same way. The market value of

the closed-end fund's shares will be based on supply and demand, much like other

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securities. Instead of selling at net asset value, the shares can sell at a premium or at a

discount to the net asset value.

Open-End Investment Companies: Open-end investment companies, also known

as mutual funds, continuously issue new shares. These shares may only be purchased

from the investment company and sold back to the investment company. Mutual funds

are discussed in more detail in the Variable Contracts section.

Non-bank Financial Institutions

Non-banking financial institutions which are not banks.These institutions cannot perform all functions of banks, which get license to operate under Financial Institution Act, 1993 are termed as Non-banking financial institutions.

Emergence of Non-Bank Financial Institutions in Bangladesh Initially, NBFIs were incorporated in Bangladesh under the Companies Act, 1913 and were

regulated by the provision relating to Non-Banking Institutions as contained in Chapter V of the

Bangladesh Bank Order, 1972. But this regulatory framework was not adequate and NBFIs had

the scope of carrying out their business in the line of banking. Later, Bangladesh Bank

promulgated an order titled ‘Non Banking Financial Institutions Order, 1989’ to promote better

regulation and also to remove the ambiguity relating to the permissible areas of operation of

NBFIs. But the order did not cover the whole range of NBFI activities. It also did not mention

anything about the statutory liquidity requirement to be maintained with the central bank. To

remove the regulatory deficiency and also to define a wide range of activities to be covered by

NBFIs, a new act titled ‘Financial Institution Act, 1993’ was enacted in 1993 (Barai et al. 1999).

Industrial Promotion and Development Company (IPDC) was the first private sector NBFI in

Bangladesh, which started its operation in 1981. Since then the number has been increasing and

in December 2006 it reached 29.1 Of these, one is government owned, 15 are local (private) and

the other 13 are established under joint venture with foreign participation.

The following institutions are not technically banks but provide some of the same services as banks. 

Name of Non-banking financial institutions

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Investment Corporation of Bangladesh (ICB) Uttara Finance and Investments Limited. United Finance. Union Capital Limited. The UAE-Bangladesh Investment Company Limited. Saudi-Bangladesh Industrial & Agricultural Investment Company Limited (SABINCO) Reliance Finance Limited.

Banks’ Entry in Non-Bank Financial Activity

The activities of NBFIs witnessed an impressive growth during the last five years. As per

Section 7 of the Banking Companies Act 1991, commercial banks also started different activities

offered by NBFIs, specially leasing. The entry of banks in this sector is expected to brace the

growth momentum and will fill the gap in acquiring the institutional finance and serve the needs

of the industrial sector in the acquisition of capital assets. Commercial banks worldwide are

directly or indirectly involved in activities such as leasing, hire purchase, term lending, house

financing and capital market operation. In developed countries commercial banks are also

actively involved in different activities other than banking.

In Turkey, banks are empowered to arrange lease finance by virtue of special laws relating to this

particular activity. Following the deregulation of the local banking system as well as

diversification of business, a number of banks in Taiwan established their own independent

leasing companies (Chen 2001). In India, commercial banks are permitted to transact leasing

business through subsidiaries. In Bangladesh, commercial banks started their leasing operation

effectively in 1995 (Banarjee and Mamun, 2003). At present, almost all major private

commercial banks are involved in non-bank financial operations. Operation by banks in what

have been traditional non-banking areas is often questioned by NBFIs

Savings and Loans

Savings and loan associations, also known as S&Ls or thrifts, resemble banks in many respects.

Most consumers don't know the differences between commercial banks and S&Ls. By law,

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savings and loan companies must have 65% or more of their lending in residential mortgages,

though other types of lending is allowed.

S&Ls emerged largely in response to the exclusivity of commercial banks. There was a time

when banks would only accept deposits from people of relatively high wealth, with references,

and would not lend to ordinary workers. Savings and loans typically offered lower borrowing

rates than commercial banks and higher interest rates on deposits; the narrower profit margin was

a byproduct of the fact that such S&Ls were privately or mutually owned.

Credit Unions

Credit unions are another alternative to regular commercial banks. Credit unions are almost

always organized as not-for-profit cooperatives. Like banks and S&Ls, credit unions can be

chartered at the federal or state level. Like S&Ls, credit unions typically offer higher rates on

deposits and charge lower rates on loans in comparison to commercial banks.In exchange for a

little added freedom, there is one particular restriction on credit unions; membership is not open

to the public, but rather restricted to a particular membership group. In the past, this has meant

that employees of certain companies, members of certain churches, and so on, were the only ones

allowed to join a credit union. In recent years, though, these restrictions have been eased

considerably, very much over the objections of banks.

Shadow Banks

The housing bubble and subsequent credit crisis brought attention to what is commonly called

"the shadow banking system." This is a collection of investment banks, hedge funds, insurers and

other non-bank financial institutions that replicate some of the activities of regulated banks, but

do not operate in the same regulatory environment.

The shadow banking system funneled a great deal of money into the U.S. residential mortgage

market during the bubble. Insurance companies would buy mortgage bonds from investment

banks, which would then use the proceeds to buy more mortgages, so that they could issue more

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mortgage bonds. The banks would use the money obtained from selling mortgages to write still

more mortgages.Many estimates of the size of the shadow banking system suggest that it had

grown to match the size of the traditional U.S. banking system by 2008.

Apart from the absence of regulation and reporting requirements, the nature of the operations

within the shadow banking system created several problems. Specifically, many of these

institutions "borrowed short" to "lend long." In other words, they financed long-term

commitments with short-term debt. This left these institutions very vulnerable to increases in

short-term rates and when those rates rose, it forced many institutions to rush to liquidate

investments and make margin calls.

Moreover, as these institutions were not part of the formal banking system, they did not have

access to the same emergency funding facilities. (Learn more in The Rise And Fall Of The

Shadow Banking System.

State-owned commercial banks

State-owned banks are functioning as nationalist. Among the state owned banks, six are commercial and two are specialized. Here is the list:

State-owned Commercial Banks

1. Sonali Bank Limited http://www.sonalibank.com.bd/2. Janata Bank Limited http://www.janatabank-bd.com/3. Agrani Bank Limited https://www.agranibank.org/4. Rupali Bank Limited https://rupalibank.org/en/5. BASIC Bank Limited http://www.basicbanklimited.com/6. Bangladesh Development Bank Limited[1]

State-owned Specialized Banks

1. Rajshahi Krishi Unnoyon Bank (RKUB)2. Bangladesh Krishi Bank Limited

Expansion of Branches:The TBL has taken up a programme to expand its branches. The bank has already 13 branches in many different places in Bangladesh; most of them are inside the different cantonments.

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The management is filling that they need more branches all over the Bangladesh. So very recent they will open a branch in Dhanmondi. As per Bangladesh Bank circular that if any bank opens a branch in Dhaka then they have to be open a branch in out side Dhaka.Information Technology & Automation:All the branches of the TBL are fully computerized. New software is now in use to provide faster, accurate and efficient service to the clients. The bank is continuously striving for better services through extensive automation of its branches. We are soon going to launch “One Branch Banking” through on-line connectivity. The bank has set up a full-fledged IT division to keep abreast of the latest development of IT for better service in the days to come.

Foreign commercial banksForeign correspondent relationship facilities foreign trade operation of the bank, mainly in

respect of export, import and foreign remittance. The number of foreign correspondents and

agents of the bank in the year 2002 stood at 244, which covers important business and trade

centers of the world. The bank maintains excellent relationship with the leading international

banks, for handling all foreign correspondent and maintaining all foreign business there is

an International Division, which is called ID.

There are nine foreign commercial banks currently operating in Bangladesh. These are:

1. Bank Al-Falah

2. Citibank NA

3. Commercial Bank of Ceylon

4. Habib Bank Limited

5. HSBC (The Hong Kong and Shanghai Banking Corporation Ltd.)

6. National Bank of Pakistan

7. Standard Chartered Bank8. State Bank of India9. Woori Bank

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Specialized banks

Specialized banks were established for specific objectives like agricultural or industrial development. These banks are also fully or majorly owned by the Government of Bangladesh. Scheduled Specialized Banks:

1. Bangladesh Krishi Bank2. Rajshahi Krishi Unnayan Bank

Non-Scheduled Specialized Banks:

1. Karmasangsthan Bank2. Probashi Kallyan Bank3. Palli Sanchay Bank4. Ansar-VDP Unnayan Bank

Micro-Finance Organizations (Semi-Formal):

1. Grameen Bank

Co-Operative Banks:

1. Bangladesh Samabaya Bank Ltd2. The Dhaka Mercantile co-operative Bank Ltd3. Progoti Co-operative Land Development Bank Limited (Progoti Bank)

NPSB Member banks

1. AB Bank Limited2. Al-Arafah Islami Bank Limited3. Bangladesh Krishibank4. Bank Asia Limited5. BASIC Bank Limited6. BRAC Bank Limited7. Dutch-Bangla Bank8. Eastern Bank Limited9. EXIM Bank Limited10.First Security Islami Bank Limited11.ICB Islamic Bank Limited

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12.IFIC Bank Limited13.Islami Bank Bangladesh Limited14.Jamuna Bank Limited15.Meghna Bank Limited

Conclusion The financial sector of Bangladesh is general$ 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 unite 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. cassava government intervention and political connections, economic

and political corruptions, operational and managerial inefficiency and ineffectiveness result

invidious circle that inhibits economic development, industriali8ation, and social progresses

in poor and developing countries in general and in Bangladesh in particular.  The ombudsman

can act independently to investigate an$ complaints regarding financial services and must or

freely and independently. Better financial services and diversified financial products old bathe

natural consequence of competitive financial industry. 

Banks and Non-Bank Financial Institutions are both key elements of a sound and stable

financial system. Banks usually dominate the financial system in most countries because

businesses, households and the public sector all rely on the banking system for a wide range of

financial products to meet their financial needs. However, by providing additional and alternative

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financial services, NBFIs have already gained considerable popularity both in developed and

developing countries. In one hand these institutions help to facilitate long-term investment and

financing, which is often a challenge to the banking sector and on the other, the growth of NBFIs

widens the range of products available for individuals and institutions with resources to invest.

Through their operation NBFIs can mobilize long-term funds necessary for the development of

equity and corporate debt markets, leasing, factoring and venture capital. Another important role

which NBFI’s play in an economy is to act as a buffer, especially in the moments of economic

distress. An efficient NBFI sector also acts as a systemic risk mitigator and contributes to the

overall goal of financial stability in the economy. NBFIs of Bangladesh have already passed

more than two and a half decades of operation. Despite several constraints, the industry has

performed notably well and their role in the economy should be duly recognized. It is important

to view NBFIs as a catalyst for economic growth and to provide necessary support for their

development. A long term approach by all concerned for the development of NBFIs is necessary.

Given appropriate support, NBFIs will be able to play a more significant role in the economic

development of the country.

References:

Money, Banking And financial Market ( Frederic S. Mishkin )

https://en.wikipedia.org/wiki/Financial_institution

http://www.investopedia.com/walkthrough/corporate-finance/1/financial-

institutions.aspx

https://en.wikipedia.org/wiki/List_of_banks_in_Bangladesh

http://www.academia.edu/10894583/

Overview_of_Financial_Institutions_in_Bangladesh

http://siteresources.worldbank.org/PSGLP/Resources/WP0709Final.pdf

http://www.assignmentpoint.com/business/finance/report-on-bangladesh-

economy-and-financial-institutions.html

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