The World Bank (WB) has come up with a US$350 million project aiming at strengthening supervisory and monitoring capacity of Bangladesh's financial sector regulators, officials said.
The project may get approval by May next.
A WB team last week discussed the project components and other bilateral financial issues with the finance ministry and the central bank officials, they added.
"The World Bank wants to help us strengthen capacity of our financial sector regulators through a project which is in addition to some ongoing reforms in this arena," a senior official at the ministry of finance (MoF) told the FE.
Officials said the project will support Bangladesh's efforts to develop the financial sector by strengthening financial market infrastructure, improving regulatory, supervisory and sector developmental capacity of the central bank and building market for exporters and small and medium enterprises (SMEs) to spur competitiveness, investment and growth.
"The government thinks that the WB's support is very much effective for it, especially the knowledge and expertise the bank delivers," Shah Nur Quayyum, financial sector specialist of the WB, told the FE.
He said some other development partners are also engaged in such projects but the government wants the WB's involvement here. The information paper of the proposed project said Bangladesh needs to address several key issues like improving stability by strengthening weak banks, particularly state-owned ones and others.
Besides, the weak corporate governance in parts of the banking sector, especially state-owned banks, leads to sub-optimal loan decisions.
The supervisory and regulatory capacity of the central bank needs to be further enhanced to meet the growing complexities of financial markets.
Besides, the financial market infrastructure needs to be strengthened to improve efficiency and stability and enhance efficiency and effectiveness of transmission of policy measures.
"Another critical issue is the low level of access to finance for SMEs and agriculture, as well as the high cost of finance. In particular, long-term finance, particularly for exporters and SMEs, is limited, and the financial sector remains ineffective in its capacity to perform its transformation functions," it added.
The paper also said by strengthening the regulator's capacity building including its supervisory and oversight functions, the project would contribute to financial sector stability and mitigation of financial sector risks. By supporting its developmental capacity and innovative new products for under-served market segments, also initiatives for consumer protection will be supported.
It also said the key output of the project includes increase in annual per capita electronic payment transactions, observance of relevant standards for key payment systems, infrastructure components, enhanced supervisory capacity of the central bank through migration to risk-based supervision, and outstanding long-term loan portfolio (growth) to exporters of all partner financial institutions (PFIs) receiving World Bank support.
Another senior MoF official told the FE that the project will help further strengthen capacity of the central bank. It will focus on improvement of the payment and settlement systems, beefing up of the credit information bureau (CIB) to improve data reliability and coverage, and strengthening of the systems of the Bangladesh Financial Intelligence Unit (BFIU).
He said capacity building, automation and modernisation of other financial sector regulators-the Insurance Development Regulatory Authority (IDRA), and the Bangladesh Securities and Exchange Commission (BSEC) will also be carried out under the project.
He said development of pension market and bond market, and introduction of transition of warehouse receipts will also be studied.
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