Abu Sazzad: Country’s financial sector is lagging behind contributing proper role, hindering the economic revamping mechanism from the adverse impact of the virus pandemic as well as impeding the steady growth of the country.
Experts have expressed their deep concern to witness the vulnerable financial sector including banking sector, capital market and insurance industry which have lost their financial stability and vanity. Country’s financial sector is facing acute liquidity crisis and gradually it is deteriorating. Such insolvent financial sector may lead the whole nation into profound uncertainty.
The nerve of economy which is also recongnised as the banking sector is now applying go-slow policy for distributing adequate financial assistance to the private sector, contradicting with reality in terms of employment generation in the country.
According to Bangladesh Bank data, in October, private sector credit came down to 8.6 per cent from 9.5 per cent the previous month which is 6.2 percentage points lower than the central bank’s target of 14.8 percent for the ongoing fiscal year.
To keep maintain the social harmony and discipline, more employment generation including industrial, service and agriculture sector are a time befitting demand. Now, the banking sector is forcing to go for alternative investment to reduce excess liquidity which is now Tk 1.75 trillion.
Along with the existing unemployed people, additional 33 million people will lose their job for the negative impact of the pandemic. Considering this, the banks need to facilitate the affected farmers and Cottage, Micro, Small and Medium Enterprises for generating more employment in the post pandemic period.
Now, marginal farmers and micro stakeholders are not availing the bank loan and they are forcing to receive financial assistance from alternative resources, posing severe threat to strengthen the rural economy.
Big and traditional borrowers are availing various state facility, but the marginal people are failing to avail the credit facility which is contradictory approach in attaining the Sustainable Development Goals (SDGs) by 2024. Such loan inequality is increasing economic disparity and forcing the vulnerable people into profound uncertainty in generating regular income as well as managing minimum requirement of food items for surviving.
Apart from the banking sector, country’s capital market has failed to regain investors’ trust. However, the stock market suffered throughout last year because of different reasons like liquidity crisis, an audit demand issue between the telecom regulator and mobile phone operators, and departure of foreign investors.
On the other hand, country’s insurance sector is still facing severe hardship to operate the normal business activities accordingly,
mainly due to poor premium collection and drastic fall of investment income.
Under these circumstances, experts predicted that the contribution of the financial sector may decline further in the upcoming days due to liquidity crisis, but, strong political commitment can ensure higher financial contribution to GDP and economic growth of the country.
According to the Bangladesh Bureau of Statistics (BBS) data, the financial sub-sector’s growth dipped to 4.46 per cent in FY 2020 from that of 7.38 per cent in FY 2019. Its contribution to GDP was 3.39 per cent in FY 2020, which was 3.42 per cent in FY 2019. The contribution of the financial sector to GDP was 7.38 percent in fiscal year 2019, followed by 7.90 percent in FY 2018, 9.12 percent in FY 2017 and 7.74 percent in FY 2016.
Industry insiders said, the activities of the financial sector hampered since March this year, causing lower contribution to economy.
Jubo Economist Forum President Mirza Walid Shipon expressed his deep concern for declining the growth of the financial sector, affecting expansion of the private sector and employment generation in the country.
The government has failed to properly handle the financial sector which is threatening the overall growth of the country, he said adding that currently, the financial sector is facing multifarious challenges including weak management, poor governance, lack of strong leadership.
Financial sector especially, the banking sector is the nerve of the economy, but the sector is facing various challenges including higher NPL, capital and provision shortfall and money siphoning.
Despite allowing over Tk 50,000 crore rescheduling facilities in the last year, the banking sector is still facing capital and provision shortfall. Apart from this, the central bank recently allowed a good number of policy measures to improve the liquidity position, but still many banks are failing to provide the banking services accordingly, he added.
Many people became jobless in the recent months for the negative impact of the virus pandemic, he lamented. He has underscored the need for allocating the excess liquidity to the productive, industrial and SME sector for revamping economy and generating employment scope for the jobless people.
However, experts have underscored the need for undertaking more effective steps to revamp the financial sector including the banking sector, capital market and insurance industry for contributing more to the GDP growth of the country.
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