Failing financial sector: Community based banks an answer?

One hopes this is not too blasphemous a question but who supervises the Bangladesh Bank whose responsibility it is to supervise the financial sector in general and banks in particular? This question comes up because the dismal record of poorly functioning banks, many of whom have gone astray, no longer even make news or draw public attention.
Basically no one really bothers and people are increasingly taking it for granted that banks are meant to be fragile and such institutions such as a savings account is no longer meant to be safe. The drawer, the almirah or even the earth underground the home are safer than the vaults where public money is supposed to be safely guarded.
PUBLIC PERCEPTION: BEYOND
PUBLIC POLICY
The financial sector is supposedly what the state must ensure as the most secure because the state itself becomes the most fragile if that fails. That is one of the reasons why most governments spend longer hours to make banks secure and safe than other institutions. It's not high interest rates that matter most but safety of existing incomes.
In Bangladesh, this hasn't happened. While many kinds of outfits including leasing companies and banks do offer high interest rates, the number of rip off artists posing as financial institutions are so many that the sector is near permanently stigmatized as "well-dressed thieves." And Bangladesh Bank can't deny their responsibility in failing to prevent this.
Unfortunately, our focus is on the meta policies and commentaries on the same and there is a gnawing fear that the elite governing class is not as badly affected by financial sector mishaps as ordinary people are. The confidence people have in the institutions that govern and regulate is steadily declining. Whether that will pose a political threat or not can't be said but the fact remains that the division between the ruling class and the ruled mass is growing.
THE CONSEQUENCES OF THE
HALDAR PHENOMENON
Policy and applied level amnesia has already begun to affect the regulatory agencies because not only have none been punished and no efforts made to compensate the depositors, but no discussion is heard about the Haldar disease that affects the significant part of the financial sector, banking and non-banking in general.
PKH is himself in jail in India and that has provided a great deal of relief to the group that helped Haldar steal all the money including Bangladesh Bank officials over the years as alleged in ACC and other reports. Not only was he protected and aided but the regulatory bodies that are supposed to do their job haven't reformed any system nor improved the regulations that prevent such acts. On top of that new institutions continue to show drastically poor performances and even the latest news is about lending money to poorly or non-performing banks from the Bangladesh Bank, essentially public money.
KEEPING THE PUBLIC OUT
FROM ANY DEBATE
Let's face the fact that things are not ready to improve immediately or even in the short term. Public confidence in the institutions are low and national formal institutions are not about to change that. It's difficult to change also because the policy makers and their critics who include the media and the think tanks also occupy the same space. Hence it is increasingly becoming an internal debate, an exclusive chat among members of the ruling class only whether in or out of political power. The public that is the informal section called society is not participating in it. And because of this lack of participation and inclusion, confidence in the ultimate formal financial agency and its branches of the state are at an all-time low.
Given this reality, we need to reframe our financial instructional policies and not keep them limited to the current scenario of scheduled banks and NBFIs but explore the social space to expand the circumference of financial services.
SOCIAL AND COMMUNITY
BASED BANKS
While the idea of community based banks may seem unrealistic but in reality they already exist in the community or the informal sector. Recent studies indicate a thriving private sector loan system that has not been dislodged by the several forms of rural banking instruments. These instruments are also flexible and can be adjusted accordingly.
However, the biggest potential may lie in the micro-credit network which has served rural Bangladesh for over fifty years since birth and is actually a systemic reform of the rural informal loan system which was often very oppressive. Reading their performance without any ideological baggage will show that the system survives because people need it and it has helped the middle poor sustain and then jump into low or post poverty situations.
Another signification that shows social and community based preparedness is the Hundi business which is used not only for majority of the remittance, higher than through the formal channels but significantly so. And although it's considered "illegal" , public trust in them is total.
Remittance is also used in transferring money to India for medical treatment, UK and North America for education and money sheltering, both black and white money but as a general informal banking channel. And there is no instance of mishap because the system is trust based. In other words the informal financial transitioning, stopping and exchange is already in practice.
We lack the will to do the work to establish community-based banks because the ruling class or the formal sector will lose some control over the critical sector but it's best to think of partnerships between both because if the need is there , the informal sector will produce them. It's time for NGOs to look at the possibility as they are better connected to the informal world as an intermediary.

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