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NBFIs 'out of step with banks'

BLFCA seeks govt help to bring bonds, sukuk in market

FE REPORT | July 15, 2020 00:00:00

The Bangladesh Leasing and Finance Companies Association (BLFCA) Tuesday sought government help to bring bonds and sukuk in the market to ensure long-term sources of funds for the non-bank financial institutions (NBFIs).

At a virtual press conference, the BLFCA leaders said financial health of four to five NBFIs in the country are not well due to their bad governance, but it has affected the entire non-bank finance market.

They said they are working closely with the central bank to reconstruct formulas of those NBFIs including options of merging with stronger ones.

The NBFI leaders also said non-bank finances are facing unequal competition with banks, there should be a distinguishing line between banks and non-banks financial institutions in terms of loan terms.

They said they would come forward to revive the country's economy in the face of ongoing COVID-19 crisis by working on liquidity crisis, enhancing internal economic capacity as well.

"In terms of financial health, NBFIs are doing better than banks, but entire NBFI sector is victim of a negative image due to a few NBFIs, that impacted overall performances of the sector," BLFCA Chairman Mominul Islam, also managing director (MD) and CEO of IPDC Finance Limited said at the press conference.

He said NBFIs have been contributing to the socio-economic development of the country for many years. Currently, 33 financial institutions with their 28 branches and 6,358 officers are serving 255,000 customers across the country.

"By now, we have provided 7.4 per cent loans to banking sector, 13.3 per cent to SMEs, 12.3 per cent to industries, 45.5 per cent to depositors, and 18.4 per cent to general people," he said.

Mr Islam said most part of the Indian NBFIs fund come from bond market but Bangladeshi NBFIs are largely dependent on deposits and bank borrowing that remains a challenge for the country's NBFIs.

BLFCA executive member Arif Khan, also MD and CEO of IDLC Finance Limited, said people are reluctant to invest in instruments private financial institutions as they get higher return from government treasury bills.

He said the government has to pay more attention to mutual funds in order to make the bond market attractive and vibrant.

"If the bond market develops, the banking sector will also develop," he said.

He said another problem and challenge remains for the band market is the lengthy and complex process of approval of a bond by two regulators---the central bank and the securities regulator.

He said bond market doesn't have long term investors as banks and government's savings instruments offer higher rates of interest.

Mr Khan said NBFIs are very innovative in terms of product planning.

He said NBFIs are facing problem as banks are doing NBFIs' job and borrowing long term loans.

"This is a structural problem and acts as a barrier to the growth of NBFIs," he said.

He, however, admitted that the governance problem in some NBFIs is grave challenge for the growth of non-bank finance.

While discussing the next two years plan, Golam Sarwar Bhuiyan, vice chairman of BLFCA and MD of IIDFC, said, they have organised various workshops for developing the skills of employees at the sector to take the NBFIs forward.

"Besides, we are in talks with banks and government to reduce the existing distance between us, to enhance the ICT-based development and the bond market," he said.

BLFCA Vice Chairman Abu Zafar Md Saleh, also MD and CEO of Islamic Finance and Investment Limited, said it is necessary to allocate works and enact separate regulations for each sector for the development of the country.

"If every sector runs the same way, the economic development will be severely hampered. Besides, the country's non-bank or non-bank financial institutions are moving ahead in every area," he said.

SM Shamsul Arefin, BLFCA executive member and also MD and CEO of Uttara Finance and Investments Ltd, said NBFIs don't want to compete with the banks rather want to work together.

"Our services are easier to receive than in the banks. Hence, customers can get easy loan facility without getting upset," he added.


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