Country's financial services sector has been passing through volatile period with its growth dropping below the double-digit mark after an impressive performance three years back, for reasons that include, according analysts, some major banking scams.
Financial analysts said the growth of the country's financial sector had been in the single-digit mark during the last three years from its impressive double-digit scale of expansion in 2011-12 financial year.
Several scams that rattled the banking sector over the last few years are seen as a major reason for the backsliding.
The Bangladesh Bureau of Statistics (BBS) data showed the growth of the financial intermediations, including that of banks, non-bank financial institutions and insurance sector investment banks, was volatile in the last three years after a substantial growth recorded in the FY 2011-12.
The financial intermediation had come down below the double-digit level to 9.11 per cent (at constant price) two years ago, in FY2013. But it dropped deeper to 7.27 per cent in the subsequent FY2014.
And it has again took an upturn in the current fiscal (FY2015) to reach 8.83 per cent as per the latest BBS estimate.
However, the growth in the country's financial sector had been maintaining an impressive trend three years ago. In FY2012, this sector expanded at 14.76 per cent rate, according to the BBS calculations.
The growth remained within double-digit territory (10.44 per cent) in the preceding FY2011, too.
According to the BBS data, the growth in the monetary intermediation (banking) sub-sector out of the financial intermediation sector had been in massive volatility on a downturn in the last three years.
The banking sub-sector expanded at a record 17.61 per cent rate three years ago, in FY2012. In FY2013, the indicator shed some points to reach to 10.87 per cent.
In the FY2014, its growth performance was even poorer, with only 8.33 per cent expansion, in the wake of several banking-sector scams.
Finance adviser of the last caretaker government and economist Dr Mirza Azizul Islam told the FE that poor business situation and financial scams over the last few years were the major dampers for the financial sector.
"Stagnant business situation both in retail and wholesale levels and weak investment scenario both in private and foreign aspects and the local banking scam have affected the growth in the country's financial sector," he said.
Former Bangladesh Bank Governor Dr Salehuddin Ahmed said huge default loans gripped the banking sector that affected their business severely.
"Besides the recent financial scams, sluggish investment and failure to expand lending situation to the small and medium enterprises are the reasons for the fall of the growth of the financial intermediation," Dr Ahmed told this reporter.
The country's banking sector was hit hard by several scams involving forged lending in 2013-2014 period that harmed the overall financial sector of the country.
Hall-Mark Group swindled more than Tk 35 billion from a Sonali Bank branch -- the single-largest bank fraud in Bangladesh history.
BASIC, another state-owned bank, also sanctioned over Tk 40 billion in loan without maintaining proper procedures. Those scams had not only hit the two state-owned banks themselves but also affected some other private and public-sector banks, too.
Professor Shamsul Alam, member of the General Economics Division, told the FE that the scams and slower investment growth affected the growth of the financial sector in Bangladesh.
"Besides, strict monitoring by the central bank on the financial transactions to check money laundering and scams in the banking sector could have some short-term impacts on the financial sector," he said.
"But I hope the banking and financial systems will overcome the short-term impacts and expand at impressive rates in the coming years," the GED member said.
The financial analysts suggested that the government take some pragmatic steps to prop up investment both from the local and foreign sources and create a better business environment in the country as early as possible to recover from the losses and achieve more than 8.0 per cent GDP growth.
The government has been using its expansionary monetary policy and financial management over the last few years but the overall GDP growth has not been able to cross the 6.0 per cent trajectory in last one decade. The share of the financial intermediations like banks, non-banking financial institutions and insurance sector in the country's GDP is 3.41 per cent as estimated by the BBS in the current fiscal year.
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